The Breeders’ Cup horse racing event arrives amid significant legal and regulatory challenges that could reshape wagering on the sport. Central to these issues is a lawsuit between TwinSpires, an online racebook owned by Churchill Downs, and the state of Michigan, which questions whether states can impose licensing restrictions on interstate online horse betting or if federal law—the Interstate Horseracing Act (IHA)—preempts such state controls. TwinSpires argues that as long as consent is obtained from the relevant racing jurisdictions, bets placed across state lines should be legal, potentially opening the door for online horse betting even in states like Utah and Texas where gambling is currently prohibited. Michigan counters that wagers must comply with state laws, emphasizing states’ rights to regulate gambling within their borders. The case’s outcome could fundamentally alter the regulatory landscape for horse racing wagers nationwide.

Alongside this legal battle, the industry faces growing discontent from everyday bettors over “computer-assisted wagering” (CAW) groups, which use sophisticated algorithms to place large bets late in the betting pools, causing volatile odds and disadvantaging casual bettors. This frustration has culminated in a new class-action lawsuit accusing major racetrack owners and CAW operators of colluding to rig the system in favor of wealthy insiders, transferring billions in profits away from average bettors. Meanwhile, prediction markets, which have disrupted sports betting by relying on federal regulation, have yet to enter horse racing, partly due to the IHA’s federal framework and Churchill Downs’ firm stance against such incursions. These converging legal and market pressures underscore a period of uncertainty and potential transformation for horse racing wagering in the U.S.