Hagens Berman: Class-Action Lawsuit Unveils Massive AI Horse Betting Manipulation Scheme

Attorneys say a wealthy few have colluded in violation of federal racketeering laws to rig the game through computer-assisted wagering and other preferential advantages

NEW YORK--(BUSINESS WIRE)--A class-action lawsuit accuses major horseracing entities of colluding via computer-assisted, algorithmic betting that has disadvantaged everyday bettors in a rigged system that favors the wealthy, according to Hagens Berman.

The lawsuit was filed 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.

If you placed wagers into CAW-impacted horserace betting pools on thoroughbred horseraces while not using a CAW account, you may be affected. Find out more about your rights.

Advances in technology have relegated betting and wagering in horseracing to online-based accounts which benefit from algorithms and AI and other inside information, according to the lawsuit. 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.

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 $(US) 4 billion per year,” the lawsuit states. These parties, according to the lawsuit, rig U.S. betting pools in favor of a small group of insiders who bet enormous amounts.

“We believe this scheme is not a victimless crime,” said Steve Berman, Hagens Berman’s founder and managing partner. “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 horseracing industry,” Berman added.

“A Rigged System”

According to the lawsuit, horseracing 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 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.

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

Additional advantages 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 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.

Racetrack Racketeering

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 seeks compensatory damages and treble damages as allowed under law in RICO cases.

Find out more about the lawsuit on behalf of those who placed wagers into horse betting pools impacted by computer-assisted wagering.

About Hagens Berman

Hagens Berman is a global plaintiffs’ rights complex litigation law firm with a tenacious drive for achieving real results for those harmed by corporate negligence and fraud. Since its founding in 1993, the firm’s determination has earned it numerous national accolades, awards and titles of “Most Feared Plaintiff’s Firm,” MVPs and Trailblazers of class-action law. More about the law firm and its successes can be found at hbsslaw.com. Follow the firm for updates and news at @ClassActionLaw.