There are three interconnected reasons for the weird names:
- Racehorse names have to be formally registered with the Jockey Club, the organization that governs the naming of U.S. racehorses.
- Only one horse registered with the club can have a name at any given time (names that are currently in use cannot be used for another horse)
- Names must be unique unless they are deemed old enough to be used again; the names of race winners are automatically retired, either for certain amounts of time or for forever if the name has become enough of a cultural mainstay (see: Seabiscuit, Secretariat, etc).
#3 is determined based on two rules in the Jockey Club's naming conventions:
- Names of winners in the past 25 years of grade one stakes races are ineligible to be used for incoming horses.
- Permanent names (aka, names that can never be used again). These are horse names that are:
- in the Racing Hall of Fame;
- Horses that have been voted Horse of the Year;
- Horses that have won an Eclipse Award;
- Horses that have won a Sovereign Award (Canadian Champions);
- Annual leading sire and broodmare sire by progeny earnings;
- Cumulative money winners of $2 million or more;
- Horses that have won the Kentucky Derby, Preakness, Belmont Stakes, The Jockey Club Gold Cup, the Breeders' Cup Classic or the Breeders' Cup Turf; and
- Horses included in the International List of Protected Names.
- Sidenote: Names that are similar in spelling and pronunciation to any of the horses on the list of permanent names are also banned.
You can imagine how seemingly "normal" names get snapped up pretty quickly and then remain ineligible to use on the race circuit for several years, leading to the need for creativity. These rules, combined with the general desire for individuality and ability to distinguish one horse from another have caused quite a few ridiculous names on the race circuit over the years (Potoooooooo/Pot-8-os being an exceptionally memorable one historically, as well as horses like Ghostzapper, Odor in the Court, Red Hot Filly Pepper, and Miss She Gone).