Some of the finest Thoroughbred horses in the world will race in South Florida this weekend, including last year’s Kentucky Derby winner Mystik Dan, who will run in the $3-million Pegasus World Cup Invitational at Gulfstream Park.
A good chunk of money will be bet on the proceedings. Some of that handle could even come out of the pockets of Michiganders – but, if so, it may be through a single online betting platform that officials in the state believe shouldn’t be taking any wagers at all from locals.
That is because there is an ongoing legal and regulatory fight involving Churchill Downs Inc. and Michigan over the rights of the former to take bets online from horseplayers in the latter using the TwinSpires racebook. The fight is growing and getting noticed by others outside of Michigan, which suggests the fallout may spill beyond the state.
Oh, behave
For proof, one need look no further than Thursday's meeting of the Massachusetts Gaming Commission (MGC), which oversees legal sports betting and horse-race wagering in a state hundreds of miles away from Michigan.
The MGC received a briefing and discussed the drama in Michigan involving Churchill Downs' TwinSpires advance deposit wagering (ADW) platform. TwinSpires is authorized to take bets in Massachusetts as a vendor for Suffolk Downs, but Michigan wants the platform shuttered within its borders.
“I know it matters to us that our licensees behave in our sibling jurisdictions,” MGC chair Jordan Maynard said during the meeting.
The behavior Maynard referred to is that of TwinSpires, a subsidiary of Kentucky Derby-owner Churchill Downs.
In short: Michigan has certain state-specific requirements for online betting platforms like TwinSpires. Since those aren’t in place any longer, Michigan’s gaming regulator ordered TwinSpires and three other advance deposit wagering (ADW) sites to stop taking bets from locals.
Three have stopped, but TwinSpires has more or less said it only abided by Michigan’s licensing requirements voluntarily, and not because it must. The ADW has kept taking horse-racing bets from Michiganders despite the order to shut down, and various regulatory and legal proceedings have been triggered as a result.
“I'm not interested in getting in the middle of a legal fight, but what I am interested in is the fact that, currently, TwinSpires is out of compliance with an order, as I understand it, that was issued by … a regulatory body in another jurisdiction,” MGC commissioner Nakisha Skinner said on Thursday.
Now here’s the longer version of a disagreement that may have consequences for legal betting on horse racing even beyond Michigan.
The Michigan Gaming Control Board announced on Jan. 9 that it hit TwinSpires with a summary suspension of its ADW license for violating state law, which the regulator said stemmed from the company continuing to operate despite being ordered to stop.
The Michigan Gaming Control Board has issued a "summary suspension order" to TwinSpires for continuing to offer advance deposit wagering over the objection and order of the regulator. ADW in MI has to be tied to live racing and there is none in the state at this time. pic.twitter.com/S6EKI7ZKFv
— Geoff Zochodne (@GeoffZochodne) January 9, 2025
As outlined by the MGCB in a press release, state law requires simulcast and ADW wagering to be tied to a live race meet and a licensed track. No such things exist in Michigan at the moment, which means no ADW wagering is permitted.
As a result, the MGCB said that on Dec. 23 it instructed its four licensed ADW providers – including TwinSpires – to stop taking bets from locals as of Jan. 1. Three did so, but TwinSpires said on Dec. 31 that it would continue.
“TwinSpires’ continued violation of legal regulations prompted the MGCB to intervene and enforce compliance with the established laws governing simulcast racing by issuing the summary suspension order,” the regulator said.
The MGCB also noted that a virtual hearing before an administrative law judge had been requested to decide whether the summary suspension should continue or if TwinSpires should be hit with other fines and penalties.
That hearing was scheduled for Jan. 21. And, while there was a motion to adjourn the hearing, it was denied on Jan. 16, a spokesperson for the Department of Licensing and Regulatory Affairs told Covers. The hearing went forward on Wednesday but no decision was made by the presiding judge.
(I Can't Get No Regulatory) Satisfaction
Yet TwinSpires and Michigan are pursuing satisfaction through other courts as well.
The Churchill Downs subsidiary sued the MGCB on Jan. 12, with the company saying it was challenging "the state of Michigan’s recent, unlawful efforts to shut down the popular horserace wagering platform that TwinSpires has long offered to Michigan residents."
TwinSpires is seeking a declaration that Michigan’s “state-specific licensing requirements for interstate wagers” are preempted by federal law and unconstitutional. The company also wants the U.S. District Court for Western District of Michigan to issue an injunction that would block the MGCB and the state from forcing TwinSpires to abide by their requirements.
Plenty of paperwork has already been filed. TwinSpires is arguing that the federal Interstate Horseracing Act of 1978 (IHA) supersedes Michigan’s licensing requirements and that those requirements violate the Interstate Commerce Clause of the U.S. Constitution. Even though TwinSpires “voluntarily” obtained a Michigan license in 2020, it has always believed it does not need one, the lawsuit claims.
TwinSpires, which says it was taking $1.5 billion in wagers per year by 2019, had been accepting bets in Michigan for out-of-state races for around a decade before that year. It was 2019, though, that Michigan amended its horse racing law and imposed its new licensing requirements for “third-party facilitators” such as TwinSpires.
Begrudging compliance
Despite its concerns, TwinSpires partnered with Michigan’s only remaining racetrack for its license, Northville Downs.
However, Northville Downs shut down operations in early 2024, and while the track had a new location lined up, TwinSpires said it was told by MGCB executive director Henry Williams on Dec. 23 that the track's license would not be approved by Jan. 1. As a result, TwinSpires and others could not operate in the New Year because they lacked the necessary in-state partner.
Yet the IHA, the lawsuit states, "sets forth the exclusive conditions for ‘off-track’ betting systems like TwinSpires to accept wagers on horseracing across state lines.”
Under that law, an ADW like TwinSpires can take interstate bets on horse races if it obtains three consents: from the track running the race, the state hosting the race where the track is located, and from the agency that regulates off-track wagering in the state where the bet is accepted.
TwinSpires has all three, it argues, including from the Oregon Racing Commission, which licenses the platform to take interstate bets. It's in Oregon where those wagers are accepted, the company claims, even those placed by Michigan residents.
“Michigan, as a state whose residents place interstate wagers, simply has no place within the IHA’s exclusive statutory scheme when there is an out-of-state track and the wager is accepted out of state,” the lawsuit states.
“By seeking to impose additional state licensing requirements, Michigan is not just attempting to interfere with federally-authorized wagering on interstate horseraces, it has effectively banned such wagering – unless TwinSpires meets its demands.”
Furthermore, the lawsuit claims that the commerce clause prohibits such things as a requirement for an in-state partnership for interstate commerce.
“Michigan residents have long enjoyed wagering on one of this nation’s storied pastimes and have done so with TwinSpires for well over a decade,” the document states. “But given Michigan’s recent conduct in suspending TwinSpires’s (voluntary) Michigan license and threatening fines and other consequences, that relationship is now at risk of being irreparably harmed.”
A spokesperson for the MGCB told Covers in an email that they are aware of the lawsuit but do not comment on ongoing legal matters.
But wait, there's more!
Nevertheless, it has also come to light that Michigan is pursuing a legal action of its own. TwinSpires filed a "notice of related case" on Wednesday that said the MGCB's director, Henry Williams, was suing TwinSpires in a different federal court district in Michigan.
According to TwinSpires, an “ex parte” motion (meaning TwinSpires wasn’t notified) for a temporary restraining order was filed by Williams in Wayne County Circuit Court on Jan. 17. The order sought was to stop TwinSpires from offering its platform to Michiganders.
Williams' lawsuit said TwinSpires "has acted contrary to the [Michigan] Racing Act and poses a threat to the public interest and the integrity of wagering in Michigan."
"A summary suspension is not optional to the aggrieved party but rather is an immediate suspension pending a prompt hearing," the lawsuit adds. "Churchill, however, has defied the Order of Summary Suspension and continued to conduct internet wagering on horse racing."
Upon discovery of the dueling lawsuit, TwinSpires "removed" that case to the U.S. District Court for the Eastern District of Michigan, a federal rather than state-level court.
TwinSpires now wants the director's lawsuit transferred to Western District court where the company's lawsuit is filed, "because the Executive Director's lawsuit concerns the same parties and overlapping legal issues."
In addition to all of the above, TwinSpires is looking to speed this particular matter up. On Jan. 17, TwinSpires said it would file a motion for a preliminary injunction "to address a rapidly developing situation that requires urgent attention from this Court." The company also sought an "expedited briefing and consideration" of the case.
The license suspension, the company argued, violates federal law and “will effectively shut down all TwinSpires’s Michigan operations, result in the loss of untold profits and significant customer goodwill, as well as irreparably damage TwinSpires’s position in the market.”
Spent some time this past week looking at one area of the legalized gambling business that is struggling for growth:
— Geoff Zochodne (@GeoffZochodne) January 12, 2025
While Sports Betting Surges, Horse Racing Handle Sags https://t.co/iB0JcJ7E7y @Covers
This looming “harm” forced TwinSpires to file the lawsuit and then a motion for preliminary injunction, the company said in its legal filing. The motion for preliminary injunction followed, repeating claims made in the company's initial complaint and asking the court to stop Michigan from enforcing its licensing requirement for interstate wagers.
“TwinSpires sought to negotiate a mutually agreeable schedule such that this matter could be heard promptly, but Defendants refused to engage in scheduling discussions and declined to consider a stipulated briefing schedule,” the motion to expedite alleged.
TwinSpires asked the court for Michigan to file its response brief by Jan. 27, followed by a reply from TwinSpires by Jan. 31, and then for a hearing during the week of Feb. 3.
However, in a response in opposition to that motion on Jan. 17, the Michigan side said it was "untrue" they had refused to engage in talks about a briefing schedule.
The Michigan response also alleges that TwinSpires’ decision to ignore the summary suspension has allowed it to lure customers away from its three other competitors.
“And one [of] those competitors explored the possibility of restarting operations to gain back lost market share,” the filing states. “Contrary to its assertion, the Plaintiff is profiting and gaining market share.”
Throwback Thursday to @KentuckyDerby 150 winner Mystik Dan's romp in the G3 Southwest Stakes.
— TwinSpires Racing 🏇 (@TwinSpires) January 23, 2025
The RTKD & Oaks continues this Saturday @OaklawnRacing. pic.twitter.com/T4nADFSO58
On Tuesday, Hala Jarbou, the chief judge for the U.S. District Court for the Western District of Michigan, granted TwinSpires' motion to expedite in part.
The Michigan side was ordered to submit a response to TwinSpires' motion for a preliminary injunction by Feb. 4, and TwinSpires was given until Feb. 10 for a reply. An oral argument "and/or a hearing" on the motion will be scheduled only if necessary.
“Churchill Downs has demonstrated good cause for expedited briefing, but its proposed schedule unduly prejudices Defendants (particularly given the timing and sequence in which it submitted its motions),” Judge Jarbou wrote.
Other regulators, like the Massachusetts Gaming Commission, are keeping an eye on the proceedings.
The MGC heard during their meeting on Thursday that staff are following the TwinSpires/Michigan matter via the Association of Racing Commissioners International, a group of regulators that share information and research with each other.
"As of right now, it doesn't look like anyone's taken action, but they may," said Alexandra Lightbown, director of racing for the MGC, during Thursday's meeting. "We'll just see what happens there."
The local angle
The MGC's deputy general counsel, Justin Stempeck, said it's possible the TwinSpires/Michigan issues are resolved quickly given the speedy relief both sides are seeking from the courts.
Michael Buckley, the chief operating officer for Suffolk Downs, said they are "closely monitoring" the situation with their partner, TwinSpires.
Buckley added that TwinSpires is also arguing the Michigan suspension was issued in a "summary fashion," with no chance for a hearing or due process in the handful of days the company had to shut down.
"They're telling us that no other regulators have taken action," Buckley said. "Importantly, Oregon, where their multi-jurisdictional license is issued. And I'd add that TwinSpires is saying they do not expect any impact here in Massachusetts, where we have uniquely kind of different licensing and regulatory processes."
While there may be no "impact" in Massachusetts, the MGC isn't done considering the TwinSpires/Michigan matter.
"I want to at least have the opportunity, once the legal issues are resolved, to have a discussion among us so that we can understand exactly what happened and what steps, if any, we should be taking relative to the underlying issue of the suspension order not being adhered to," commissioner Skinner said.
