Understanding the Horse Racing Integrity Charges Against Marshall Gramm

When the news first broke Monday regarding the Horseracing Integrity and Safety Authority’s charges against Marshall Gramm, the question surrounding the case became: Was it insider trading or inadvertent access?

A college professor, Gramm developed an interest in racing as a kid. Besides being an avid bettor, he started buying horses nearly 20 years ago. He’s also considered an expert in the sport, and Gambling Insider spoke with him for a June article about computer-assisted wagering.

As the week continued, though, another question emerged: Did anyone else participate?

It’s a question that could have serious implications for the future of a sport reliant on wagering that has struggled over the years to expand its fanbase.

“This whole data thing is way deeper than Marshall Gramm,” SwiftKirk, a popular racing insider, posted on his X account Wednesday. That account broke the Gramm story hours before HISA issued its release.

For now, though, Gramm remains the only person implicated.

What is HISA?

Congress passed the Horseracing Integrity and Safety Act in late 2020 as part of a larger spending bill that created the quasi-public agency. It was the culmination of a years-long effort spurred by U.S. Reps. Paul Tonko (D-N.Y.) and Andy Barr (R-Ky.) to replace a system of regulations that varied by states with national standards and oversight from an agency connected to the Federal Trade Commission.

As part of the authority’s work, it maintains a database on racehorses that includes veterinary records and is used for research purposes. Those records are supposed to be accessed only by select individuals, including a horse’s primary owner, approved veterinarians, and state racing regulators authorized by HISA.

Not all of the racing community has embraced HISA since it officially started its work four years ago, with some states challenging the law. The U.S. Fifth Circuit Court of Appeals has ruled HISA unconstitutional, but the Sixth Circuit upheld the law.

Earlier this month, both HISA and the FTC, in separate requests, petitioned the U.S. Supreme Court to hear their cases. Last year, the nation’s top court ordered lower courts to review their HISA rulings based the Supreme Court’s decision in the Federal Communications Commission v. Consumers’ Research.

According to a HISA report from earlier this year, 41 thoroughbred tracks in 19 states abide by the agency’s rules.

Gramm Hit With Serious Charges

On Monday, the authority announced two charges against Gramm. First, it claims he accessed the HISA-maintained records for horses he did not own. In addition, the agency charged Gramm with fraud, stating he used the data for “potential wagering or claiming decisions.”

Claiming races are a staple of the sport. They allow individuals to purchase a participating horse for a set fee before the race, with the seller receiving any prize money for the horse’s finish.

Gramm, according to HISA’s release, used this access for a six-week period in May and June. During that time, he participated in several handicapping contests and purchased horses in claiming races. HISA also alleged he created past performance charts that included the confidential information and were published on social media platforms.

According to an investigation by Arete, a forensic IT firm hired by HISA insurers, Gramm used an automated process to retrieve the data in batches. That practice, HISA alleged, was similar to requests approved veterinarians would make and allowed the breach to avoid suspicion initially.

Gramm ‘Exercised Poor Judgment’

In response, Gramm posted a lengthy statement on his X account saying discussions between him and HISA officials over the charges nearly brought a resolution to the case, but those ended after HISA refused to let Gramm publicly explain his actions.

He said he accessed the data through his personal account on the HISA site, which he had because he is the primary owner of several horses. In addition, Gramm argued he “bypassed no security protocols or other safeguards” to access data on other horses.

Where I exercised poor judgment was in not bringing the vulnerability to HISA’s attention sooner after it became a public story,” he posted on X. “I should have done so, and I regret that I did not. I want to apologize for the difficulties this situation has caused.”

However, he called the case against him “a distraction from the fundamental issues HISA needs to address within its systems.”

“Horse racing has been an important part of my life for many years, and I care deeply about the integrity of the sport,” he said. “I remain willing to work with HISA to address the access-control weaknesses that allowed this information to be available.”

HISA Taking Steps to Protect Against Hackers

On Friday, HISA told Gambling Insider that it has taken steps to prevent similar incidents.

“HISA has made changes to its technology systems to prevent any similar unauthorized access going forward,” an authority spokesperson said in an emailed statement. “HISA is also devoting additional time and resources to ensure that its systems stay ahead of sophisticated hackers and are well-prepared to stop any attempts to use new tools and technologies to obtain confidential information.”

The charges against Gramm came after HISA’s investigation, which included interviews by HISA staff and contractors, as well as Arete’s review.

The results unanimously pointed to Marshall Gramm being solely responsible for accessing confidential horse health information and creating PPs for horses to which he had no legitimate connection,” the spokesperson added. “However, if we learn that other individuals were involved in this matter, HISA will investigate and take appropriate action.”

HISA Warns of ‘Significant Consequences’

According to HISA documents, Gramm has until Monday to submit formal responses to the charges. Two hearings, one for each charge, will take place in mid-September. Those hearings will not be open to the public. A three-member panel of HISA board members will hold its hearing regarding the fraud charge on Sept. 14. The authority’s Racetrack Safety Committee will hold the records access charge on Sept. 16.

Typical HISA cases take about 70 days to resolve. Gramm could face a lifetime ban as an owner in states where HISA applies if found guilty. He may also face charges from state and federal law enforcement agencies and state racing commissions as HISA officials will share their findings with those authorities.

“There must be significant consequences for individuals who violate the integrity of our rules and obtain and abuse confidential horse health information,” said HISA CEO Lisa Lazarus in the authority’s release on Monday.

If either or both hearings uphold the charges, Gramm may appeal to the full nine-member HISA Board of Directors. From there, he could also ask an administrative law judge from the FTC to review the case.