## Facts

- In 2019, Arizona enacted House Bill 2547, codified in part at A.R.S. § 5-112(U), governing simulcasts of live horse and dog races used for pari-mutuel wagering in Arizona.
- The statute required that any simulcast of live horseracing into Arizona that originated outside the state be offered to each commercial live-racing permittee (and related wagering facilities) in Arizona.
- HB 2547 also imposed similar “must offer to all permittees” requirements on certain simulcast providers of races originating in Arizona for pari-mutuel wagering.
- Monarch Content Management LLC (Monarch) acted as an agent for multiple out-of-state racetracks, arranging distribution of simulcast signals and access to pari-mutuel wagering pools and real-time odds.
- Monarch had a contract with Turf Paradise, an Arizona racetrack and off-track betting operator, to provide Turf Paradise with simulcasts of out-of-state races and related wagering access.
- At the time, Turf Paradise and Arizona Downs were the only two Arizona permittees holding pari-mutuel wagering permits issued by the Arizona Department of Gaming.
- Monarch did not want to enter a simulcast-wagering contract with Arizona Downs.
- Monarch alleged that once HB 2547 became effective, it would have to either (a) offer simulcast content for pari-mutuel wagering to Arizona Downs as well as Turf Paradise, or (b) stop providing simulcasts for pari-mutuel wagering purposes in Arizona.
- Before the statute’s effective date, Monarch sued the Arizona Department of Gaming seeking declaratory and injunctive relief, including a preliminary injunction barring enforcement.
- Monarch argued that the statute conflicted with the Interstate Horseracing Act (IHA), which conditions interstate off-track wagering on consent by the host racing association and other required approvals, and also raised constitutional challenges (First Amendment, Contract Clause, Fourteenth Amendment due process/vagueness, and Dormant Commerce Clause).

## Issues

1. Whether Monarch was likely to succeed on the merits that A.R.S. § 5-112(U) is preempted by the Interstate Horseracing Act because it effectively forces simulcast offers to in-state permittees without regard to the host racing association’s consent for off-track wagering.
2. Whether Monarch was likely to succeed that § 5-112(U) violates the First Amendment by regulating simulcast distribution in a way that restricts or compels protected speech.
3. Whether Monarch was likely to succeed that the statute violates the Contract Clause by substantially impairing Monarch’s contractual relationship with Turf Paradise and related contractual expectations.
4. Whether Monarch was likely to succeed that § 5-112(U) is unconstitutionally vague and/or violates the Fourteenth Amendment’s due process protections.
5. Whether Monarch was likely to succeed that § 5-112(U) discriminates against or unduly burdens interstate commerce in violation of the Dormant Commerce Clause.
6. Whether the remaining preliminary-injunction factors (irreparable harm, balance of equities, and public interest) supported enjoining enforcement before the statute took effect.

## Decision

- The court denied Monarch’s motion for a preliminary injunction.
- The court found Monarch had not shown a likelihood of success on the merits of its IHA preemption theory or its constitutional claims.
- Because Monarch did not meet the likelihood-of-success requirement for extraordinary interim relief, the court declined to block enforcement of § 5-112(U) pending further proceedings.

## Legal Principles

- A preliminary injunction is an extraordinary remedy requiring proof of (1) likely success on the merits, (2) likely irreparable harm without relief, (3) a balance of equities favoring relief, and (4) consistency with the public interest.
- Federal conflict preemption requires a showing that compliance with both federal and state law is impossible, or that the state law stands as an obstacle to Congress’s objectives; where the federal statute does not regulate the same subject as the state provision, preemption is less likely.
- The IHA governs when interstate off-track wagering may occur (including required consents), while state law may regulate gambling and wagering operations within the state so long as it does not require conduct that violates the IHA’s consent scheme.
- A law that regulates the business terms and availability of wagering content in a heavily regulated industry is generally treated as economic regulation, not a direct regulation of expressive content for First Amendment purposes.
- Contract Clause analysis asks (1) whether a law substantially impairs a contractual relationship and, if so, (2) whether the impairment is reasonable and necessary to serve a significant and legitimate public purpose; regulation in an area subject to pervasive state control is less likely to amount to an unconstitutional impairment.
- Vagueness and due process challenges are evaluated in context; regulated entities may be expected to understand statutory obligations stated in ordinary terms, especially where an administrative enforcement setting supplies additional structure.
- Dormant Commerce Clause review focuses first on discrimination against interstate commerce; a facially neutral law aimed at in-state wagering operations is generally upheld where any incidental burden on interstate commerce is not clearly excessive in relation to legitimate local interests such as regulation of gambling.

## Conclusion

In Monarch Content Management LLC v. Arizona Department of Gaming, the district court refused to preliminarily enjoin Arizona’s 2019 simulcast-offer requirement because Monarch failed to show a likelihood of success on its claim that the Interstate Horseracing Act preempted A.R.S. § 5-112(U) and likewise failed to show likely success on its First Amendment, Contract Clause, Fourteenth Amendment vagueness/due process, and Dormant Commerce Clause challenges; without that showing, and given the state’s strong interest in regulating pari-mutuel wagering, the court left the statute in force pending further litigation.


Monarch Content Management LLC v. Arizona Department of Gaming, 2019 WL 7019416 (2019)