3. RACING PERMIT A. The Jockey Club, in its discretion and for good cause, may issue a Racing Permit for any horse which has been genetically typed and parentage analyzed and whose dam qualified, but whose sire did not qualify. The Jockey Club may consider any other relevant factors in its determination and may require the owner and/or breeder to provide additional information which the The Jockey Club deems necessary. A horse issued a Racing Permit cannot be considered a Thoroughbred for breeding purposes and cannot be entered into The American Stud Book. The term “Racing Permit” should always accompany the name of the horse in any trade journal or racetrack program.
The Jockey Club
I believe you misinterpret this. The sire still has to mate with a mare to produce a horse which is allowed to compete as a Thoroughbred. It is the sire that may be of questionable origin.
I'm curious why you seem to care so much about this. I've been attending real Throughbred races for more than 50 years now. This year I will attend my 52nd consecutive Belmont Stakes and my 50th Travers. (I missed in 2008 for an overseas wedding!) This has never appeared to be an issue insofar as I am aware.
ML/NJ