Speaking as a lawyer (although not one with a lot of experience in this area), this is the key - knowledge of the risks inherent in the activity. Most everyone who parrticipates in alleycats would probably have demonstrable knowledge of such danger. (A signed disclaimer/notice, to the effect that "riding in an alleycat is an activity that exposesparticipants to the risk of serious bodily injury and death," actually wouldn't hurt, and could be helpful in defendning subsequent lawsuits.) Of course, if other people (pedestrians or something) got hurt, the race organizer might have a tougher time in court. The secret to protecting yourself from liability, more than anything else, is to be poor. No one bothers to sue poor people.

Then again, your locality may have criminal laws against organizing or participating in bicycle races on public streets (public nuisance, disorderly conduct, and even illegal gambling statutes might be pressed into service for this purpose), and a big accident is the sort of thing that could bring charges against a race organizer. Seems like every few years, city councillors get all worked up about the bicycle menace and spend some bluster and outrage on it before turning to some other issue; I imagine it's only a matter of time before alleycats become the focus of this silly, passing civic wrath.