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While the court remains divided on the interplay between federal financial laws and state gaming regulations as regards Kalshi, CFTC, and other sports prediction platforms, the situation surrounding Churchill Downs and the Michigan Gaming Control Board (MGCB) has seen a clearer direction.
The federal appeals court recently ruled against the MGCB’s attempt to block a preliminary injunction that favors TwinSpires, allowing it to continue operating in Michigan without a third-party facilitator license.
The Story So Far
The conflict began when Churchill Downs challenged the MGCB’s decision to revoke its advance-deposit wagering license, leading both parties to pursue legal action in Michigan District Courts. The lower court initially sided with Churchill Downs, granting an injunction that permitted its app to remain active while the case is ongoing.
On August 1, the Sixth Circuit Court of Appeals upheld this decision, denying Michigan’s request to stay the injunction.
The court emphasized that the Interstate Horseracing Act of 1978 clearly preempts state regulations that conflict with federal laws on interstate betting, suggesting that the MGCB’s efforts to impose its own licensing requirements are likely unenforceable.
TwinSpires, which operates under a license from the Oregon Racing Commission, argued that Michigan’s regulations infringe upon federal laws designed to protect interstate gambling operations from state interference.
“When ‘Congress enacts a law that imposes restrictions or confers rights on private actors’, and ‘a state law confers rights or imposes restrictions that conflict with the federal law,’ ‘the federal law takes precedence and the state law is preempted’,” the court noted.
Federal Law Superior, Court Claims
The appeals court noted that the Interstate Horseracing Act (IHA) clearly defines the terms of off-track betting based on where wagers are accepted, not where they are placed
Michigan officials had maintained that their state qualified as an “involved state” under the federal act, which they argued gave them the authority to regulate wagers made within their borders.
The court firmly disagreed, stating, “Defendants’ alternative interpretation would allow Michigan to regulate wagers on races already committed to the regulation of other states, which flatly contradicts the IHA’s express intent to ‘prevent interference by one state with the gambling policies of another.’”
No Case for Irreparable Harm
The court also dismissed Michigan’s claims of irreparable harm, pointing out that while states have the sovereign right to regulate gambling, the defendants did not provide sufficient evidence to raise “serious questions going to the merits” of their appeal.
As a result, the court upheld the district court’s preliminary injunction, blocking Michigan from enforcing its licensing requirements or imposing sanctions against TwinSpires for accepting bets from Michigan residents on out-of-state races.
Source: NEXT.io
Image credit: W.marsh
