*WARNING* Some soapbox content may offend.
The following is not directed at anyone in particular, just trying to be constructive here.
With the numbers indicated in the news-link, it wouldn't be so difficult to get something LEGAL and somewhat SAFER going.
Get the relevent authorities on side by approaching them with ... "we intend organising a safe and legal environment where people can race ... " and ask them for support. Every public authority likes being associated with something positive.
You will need the support of:
Police
Emergency Services
DMV (someone to check drivers have roadworthy vehicles)
Whoever can authorise road-use (find a suitable venue where both drivers and spectators will be safe)
A sympathetic legal type (to compile liability disclaimers etc.)
Charge the drivers and spectators a reasonable fee and use that money to reimburse the support people/authorities. Hell, with those numbers someone might even make a buck.
(here comes the soapbox bit)
Now either do it, or else don't whine about being busted - or about how someone else should organise something. There are always alternatives.