The state of Michigan and online racebook operator TwinSpires are not backing down in their dispute about who has the final say over mobile wagering on horse racing in the Mitten State.
If anything, the legal and regulatory battle is ramping up, with TwinSpires seeking satisfaction through the courts and the Michigan Gaming Control Board (MGCB) isolating the operator outside them by allowing other racebooks to reopen their businesses.
Legal and regulatory proceedings paint a complicated picture.
In one corner, TwinSpires is arguing that federal law gives them the right to take bets from Michiganders on races run outside the state. In the other, Michigan is arguing its requirements for pari-mutuel wagering are legally sound and should be followed – but that TwinSpires continues to flout them.
The Home Depot defense
The latest word came from TwinSpires, a subsidiary of Kentucky Derby-owner Churchill Downs Inc., in a filing on Monday in the U.S. District Court for the Western District of Michigan.
TwinSpires is challenging the constitutionality of Michigan's licensing requirements for interstate wagering on horse races. The company is also seeking a preliminary injunction from the court that would block the state from enforcing those requirements.
The lawsuit was filed after the MGCB’s decision last month to summarily suspend TwinSpires' advance deposit wagering (ADW) license, which the company said it only "voluntarily" obtained in the first place.
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
Michigan is objecting to the lawsuit and bid for preliminary injunction. However, TwinSpires' latest filing pushes back on that pushback, arguing the state is raising misguided "jurisdictional" objections and "misreading" the federal law the company is relying upon for its ongoing Michigan operations, the Interstate Horseracing Act (IHA).
TwinSpires says it has the three "consents" required by the IHA that it needs to keep taking bets from Michiganders, which the company continues to do despite orders from the local regulator to knock it off.
Those consents, the company says, are from the track where a race is run, the state regulating that track, and the state where the off-track wagers are accepted, which, TwinSpires says, is Oregon, where its betting "hub" is based. TwinSpires is charging that Michigan is being unreasonable by requiring a "fourth" consent, a partnership with a racetrack in the state.
"It is undisputed that TwinSpires has obtained those three consents, and Michigan cannot override the federal statute by demanding that TwinSpires also obtain a fourth consent by complying with its Licensing Requirements," the company says in its latest filing.
"And Defendants’ argument that the Licensing Requirements survive Commerce Clause review fails because Michigan cannot require out-of-state companies to partner with an in-state company as a condition of transacting with in-state residents. It should be self-evident that Michigan may not demand that an online retailer partner with – and pay a commission to – a local hardware store before it may sell a hammer to a Lansing resident."
TwinSpires' filing requests oral arguments on the matter. A judge has already said those arguments "and/or" a hearing on the motion for a preliminary injunction will be scheduled if the court deems it necessary.
Duly noted
The legal battle is a challenge to the status quo for online wagering on horse racing in Michigan. It’s also a battle that other regulators have taken notice of, particularly the Massachusetts Gaming Commission (MGC), and there could be repercussions beyond the borders of Michigan depending on the outcome.
In the meantime, while TwinSpires may have had the latest word, it hasn't had the last. There has been a lot more said and done by the Michigan side both in and out of the courts.
Michigan shuttered its market for mobile pari-mutuel betting at the start of January, as there was, at that point, no licensed racetrack and therefore a lack of the legal conditions the state requires for advance deposit wagering (ADW).
Three ADW operators complied with the shutdown, such as FanDuel. One, TwinSpires, did not, arguing (among other things) that its Michigan business remains legal because it complies with federal law in offering interstate, "off-track" wagering.
TwinSpires was responsible for $43.2 million of the $88.4 million in "third-party facilitator" wagering in Michigan in 2023, making it the top operator by handle.
Plot twist
However, an order granting a track license to Northville Downs was recently approved by the MGCB’s executive director effective Jan. 31, more than two weeks after TwinSpires sued.
The Northville Downs application was initially found to be incomplete, which prompted Michigan's ADW shutdown in January. The track used to operate near Detroit but has since closed and is moving locations.
Even though the application was incomplete, the MGCB's executive director still issued an order granting Northville Downs a 2025 race meeting license and simulcast permit. The licenses, though, were conditioned so they would not take effect until a track license was issued for a new location in Hastings.
The track license now granted to Northville Downs resulted in the MGCB issuing another order that ended a summary suspension of the race meeting license and simulcast permit.
This paved the way for licensed "third-party facilitators" that contract with race meeting licensees to resume their business. That is, with one exception: TwinSpires.
“As a result, NYRA Bets, FanDuel Racing/TVG, and Xpressbet can resume accepting Advance Deposit Wagering (ADW) in the state of Michigan effective immediately,” said Lisa Keith, public information officer for the MGCB, in an email to Covers last week. “However, TwinSpires will not be able to resume ADW operations due to ongoing litigation.”
TwinSpires had applied for a renewal of its license in late November, and the company argued the conditioning of the race meeting license with the track license was "contrary to Michigan law."
Nevertheless, the MGCB’s recent moves isolated TwinSpires, leaving it as the only previously licensed ADW operator without authorization to take bets in the state.
Let's get ready to litigate
Which brings us back to the courts.
Michigan officials are arguing that TwinSpires' lawsuit alleging the state’s horse-racing rules run afoul of the U.S. Constitution is full of holes and should be thrown out.
The MGCB, the regulator’s executive director, and the state’s attorney general filed a motion on Jan. 31 to dismiss the lawsuit. The Michigan side also filed documents last week asking the U.S. District Court for the Western District of Michigan to reject TwinSpires’ motion for an injunction.
Spent some time trying to sum up what is a complicated (and, imo, interesting) battle over online betting on horse racing that is raging in Michigan but being noticed elsewhere:
— Geoff Zochodne (@GeoffZochodne) January 23, 2025
A Fight Over Horse Race Betting in Michigan Keeps Getting Bigger https://t.co/4Yqv3x4Kya @Covers
Yes, I can. No, you can't
A spokesperson for the MGCB said the regulator does not comment on ongoing legal matters as a matter of policy.
However, the regulator has commented plenty in the legal system.
"Since 2020, TwinSpires has held a Michigan license to accept interstate parimutuel wagers from Michigan residents," the Michigan side says in its court filings. "But now that it is subject to disciplinary penalties for willfully disregarding an order from the Executive Director, TwinSpires claims that it can conduct interstate wagering in Michigan without Michigan’s consent, and that Michigan law requiring it to hold a state license to conduct wagering in Michigan is preempted by the federal Interstate Horseracing Act."
The Michigan side has advanced several arguments about why the lawsuit should be shut down, including that TwinSpires does not have a constitutional leg to stand on.
Michigan also says the court should dismiss the complaint because TwinSpires filed the lawsuit before exhausting its "administrative remedies."
While an administrative hearing regarding TwinSpires' summary suspension order was held on Jan. 21, a final decision has not been announced and the MGCB's executive director had not made a final ruling as of last week.
“[I]n fact, TwinSpires is currently violating both the IHA and Michigan law by accepting interstate wagers in Michigan,” a brief from the Michigan side says.
And, although TwinSpires "correctly identifies" the four factors needed for a preliminary injunction, Michigan claimed last Tuesday that the company failed to note it must additionally "show a likelihood of success in establishing jurisdiction over the defendant."
TwinSpires has not done so for a few reasons, Michigan claims, including that it "failed to plead any federal cause of action" and that the IHA prohibits the company from suing the state based on "alleged violations."
Not bloody likely
Even if the lawsuit cleared this hurdle, Michigan says it would still be right for the court to deny the motion for a preliminary injunction for several other reasons, including that TwinSpires "does not have a strong likelihood of success on the merits of its claims."
While TwinSpires is relying in part on a license from the Oregon Racing Commission to take bets in other states, Michigan argues this is not enough.
"[I]n order to accept interstate off-track wagers in Michigan, the IHA requires TwinSpires to have consent from the Executive Director of the MGCB," Michigan's response to the motion for an injunction says. "TwinSpires argues that this consent is not required – claiming it only needs consent from Oregon to conduct interstate off-track wagering in Michigan and every other state in the union."
Michigan is also arguing that giving TwinSpires an injunction would send the wrong message for other operators that abided by the regulator's orders.
"By granting TwinSpires’ request for a preliminary injunction, the Court would harm the other third-party facilitators who complied with the Executive Director’s requests to stop offering online parimutuel wagering," the response states. "Granting TwinSpires request for a preliminary injunction would also harm public interest, that is clearly recognized by federal law, that citizens have in the State of Michigan having regulatory control over parimutuel wagering offered via the internet within Michigan."
Agree to disagree
TwinSpires had until Feb. 10 for a reply regarding the preliminary injunction. Its response (unsurprisingly) takes issue with Michigan's view.
"TwinSpires’s claims arise under the Constitution and the laws of the United States," the company said in its Monday filing. "TwinSpires seeks injunctive relief on the basis that, under the Supremacy Clause, the IHA preempts Michigan’s Licensing Requirements; and on the basis that, under the Commerce Clause, the Licensing Requirements discriminate against interstate commerce. There is 'no doubt' those claims establish federal question jurisdiction."
Furthermore, TwinSpires says Michigan sought "another way" to avoid having a federal court settle the issue, via a "mirror image" of the company's lawsuit that the state filed in Wayne County Circuit Court.
"It contended that TwinSpires could not lawfully continue to accept interstate wagers from Michiganders and asked the state court to order TwinSpires to immediately shut down its operations in Michigan," the company said in its filing on Monday. "The [MGCB's] Executive Director did not tell TwinSpires he had filed a lawsuit and sought a [temporary restraining order] – nor did he notify this Court that he had asked the Wayne County court to jump in front of this Court by immediately issuing a ruling that (he hoped) would divest this Court of jurisdiction and render the dispute moot."
TwinSpires "removed" that lawsuit to federal court and then moved to have the case transferred to the Western District.
"The Executive Director’s maneuvers reflect his recognition that TwinSpires is likely to succeed on the merits and will suffer irreparable harm if forced to shut down its Michigan operations," the company alleged. "This Court should grant a preliminary injunction."
