A class-action lawsuit accuses major horse racing entities of colluding via computer-assisted, algorithmic betting that has disadvantaged everyday bettors in a rigged system that favours the wealthy.

The lawsuit was filed by Ryan Dickey in the U.S. District Court for the Eastern District of New York on Oct. 24, 2025 against racetrack owners Stronach Group Inc., Churchill Downs Inc. and the New York Racing Association – who also own or co-own computer-assisted wagering (CAW) platforms Elite Turf Club LLC and Velocity – in addition to United Tote company and Racing and Gaming Services.

Advances in technology have relegated betting and wagering in horse racing to online-based accounts which benefit from algorithms and AI and other inside information, according to the lawsuit. The lawsuit claims that wagering profits are now the result of an organized scheme and has resulted in the transfer of billions to a small group of inside bettors and the operators of racetracks and betting platforms.

In addition, the lawsuit states that in many cases, given their preferential advantages, these inside bettors enjoy no-risk, no-loss “wagering” opportunities with respect to amounts now approaching nearly $4 billion (USD) per year. These parties, according to the lawsuit, rig U.S. betting pools in favour of a small group of insiders who bet enormous amounts.

“We believe this scheme is not a victimless crime,” said Steve Berman, founder and managing partner of Hagens Berman, serving as counsel.  “Its victim – the average public bettor – has been caught in a modern reverse-Robinhood scenario in which a select few with inside information are stealing from average public retail bettors and giving to the already rich – a small group of bettors and the operators of racetracks and betting platforms – the wealthy and few.”

“The use of AI-based assistance and other privileges extended to this privileged group  has created the means for a privileged insider group who controls vast sums of money, to conspire with various elements of the horse racing industry,” Berman added.

According to the lawsuit, horse racing provides opportunities for significant profit for savvy algorithmic groups and attracts billions of dollars globally in wagering and trading.

The lawsuit highlights various ways the insider betting groups can allegedly exploit ordinary bettors who go through slower retail or web interfaces. For example, the members of the insider betting group receive rebates/low host-fee deals that are unavailable to the public/retail players.

“This changes the entire nature of the game for the insiders, making it extremely profitable to them, while the same betting strategies would bankrupt retail player,” the lawsuit states. High-volume members of the insider trading group negotiate sizable rebates, so they can grind razor-thin edges and still show profits, while the same strategies employed by retail bettors would result in bankruptcy, the lawsuit alleges.

According to the lawsuit, these pricing advantages allow insider betting group members to profitably employ strategies that would bankrupt a retail player, according to the lawsuit.

Additional advantages, according to the lawsuit, include preferential access and execution quality, ability to move prices when public bettors are stuck with worse final odds than they bought, an informational advantage allowing programmatic scanning of odds that a human is incapable of replicating, an ability to hedge and diversify across pools in ways impractical for retail users and more, including an advantage in risk management: The net effect of all of these advantages allegedly allows the insider betting group members to enjoy cheaper prices, faster execution, better information, and scale – advantages that compound in a pari-mutuel system, where one side’s edge directly reduces the other’s, according to the lawsuit. The insiders do not just enjoy higher margins but are playing an entirely different game to the detriment of retail players.

The lawsuit brings claims of unjust enrichment, conspiracy, conversion and violation of the Racketeer Influenced and Corrupt Organizations Act, the same law brought against members of the Mafia for organized criminal behavior.

The entities named in the lawsuit conducted an enterprise to achieve their goal, according to the lawsuit, which opens with a quote from a Guardian reporter on the subject: “Cash-strapped racetracks are selling out everyday bettors to whales who use algorithms to wager huge sums at friendlier odds. It’s a rigged system designed for the rich to get richer.”

“Racketeering historically means basement meetings and mob boss meetings,” Berman said. “Modern iterations operate digitally but still have the same effect: a colluded pattern of activity that serves to manipulate and corrupt outcomes of an otherwise legitimate economic environment, transforming them into something unlawful, in a repeated and continued fashion.”

“Our legal team is comprised of forensic accountants skilled in uncovering economic damages, and we intend to rightfully recover the losses suffered by those in this proposed class,” he added.

The lawsuit, available here and below, seeks compensatory damages and treble damages as allowed under law in RICO cases.

(with files from Hagens Berman)