The Federal Trade Commission advised the New Orleans Fifth Circuit Court of Appeals in a Sept. 2 letter that the Horseracing Integrity and Safety Authority had proposed two rule changes to address objections raised by two states and others. in a federal trial.

The lawsuit was filed in the U.S. District Court for the Western District of Louisiana, which on July 26 issued a preliminary injunction limiting HISA’s power to enforce FTC security rules in Louisiana and West Virginia and to all plaintiffs in the case. The decision was not based on constitutional grounds.

On August 8, the Fifth Circuit Court of Appeals ordered a stay of the district court’s injunction, except for its application to three settlements while it considers an appeal of the injunction. Oral arguments on the merits of the case followed on August 30.

The FTC’s letter notes that “The District Court has found portions of three of these settlements to be…substantially invalid. These settlements are:

“(1) The definition of ‘covered horse’ in the 2010 rule;’

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(2) Rule 8400(a)(1), which grants the Authority authority to access certain property of Covered Persons;

(3) rule 8400(a)(2), which grants the Authority the power to seize contraband or suspected contraband; and

(4) Rule 8520, which sets out the Commission’s methodology for assessing fees.”

The proposed changes to the rules described in the letter are relevant to the first two regulations listed.

A revised definition of a “covered horse,” which is a horse covered by regulation, was submitted to the FTC by HISA on Aug. 17 and, according to the letter, “removes text from the existing definition that the district court found problematic.” The proposal should be ripe for approval or disapproval by the FTC in early December.

The second revision could be passed by the FTC in just three weeks. It specifies that HISA may access the books, records, offices, facilities and other places of business of a horse owner or service provider only when such property is “related to the care, treatment, training and indoor horse racing. According to the FTC letter, the district court declared the existing rule invalid because it lacked the cited limitation.

A third proposed rule change described in the letter “further delineates the scope of HISA’s power to seize evidence and provides a process for the return of seized property.” The letter indicates that this change, which could also be adopted in three weeks, is not directly relevant to the appeal.

If the parties who filed the lawsuit agreed with the letter’s assessment of the impact of the rule revisions, that would raise two of the issues on appeal to the Fifth Circuit, which would simplify a little the job of a appeal panel of three judges and staff.

The remaining questions on the appeal would then be: whether HISA’s blanket search and seizure powers are valid; whether a rule on the methodology for assessing state charges is consistent with the underlying enabling legislation; and whether a comment period required for all security rules between their proposal and their adoption has been inappropriately shortened.

Oral arguments were also held with the Fifth Circuit on August 30 for an appeal filed by the National Horsemen’s Protective and Benevolent Association and affiliates of a decision of the U.S. District Court for the Northern District of Texas. In this case, the HBPAs challenged the constitutionality of HISA and lost.

The Fifth Circuit has this case pending and a decision will be rendered in due course. The next step for the losing side would be the United States Supreme Court, if the high court accepts the case for review.