Here is the section:
811.125 Speed racing on highway; penalty. (1) A person commits the offense of speed racing on a highway if, on a highway in this state, the person drives a vehicle or participates in any manner in any of the following in which a vehicle is involved:
(a) A speed competition or contest.
(b) An acceleration contest.
(c) A test of physical endurance.
(d) An exhibition of speed or acceleration.
(e) The making of a speed record.
(f) A race. For purposes of this paragraph, racing is the use of one or more vehicles in an attempt to outgain, outdistance or prevent another vehicle from passing, to arrive at a given destination ahead of another vehicle or vehicles or to test the physical stamina or endurance of drivers over long distance driving routes.
(g) A drag race. For purposes of this paragraph, drag racing is the operation of two or more vehicles from a point side by side at accelerating speeds in a competitive attempt to outdistance each other, or the operation of one or more vehicles over a common selected course, from the same point to the same point for the purpose of comparing the relative speeds or power of acceleration of the vehicle or vehicles within a certain distance or time limit.
(2) The offense described in this section, speed racing on a highway, is a Class A traffic violation and is applicable on any premises open to the public. [1983 c.338 §568; 1985 c.16 §287]
811.127 Organizing a speed racing event; penalty. (1) Except as provided in subsection (3) of this section, a person commits the offense of organizing a speed racing event if the person in any manner organizes a speed racing event.
(2) As used in this section, "speed racing event" means an event that:
(a) Is preplanned and coordinated and involves two or more vehicles;
(b) Includes any of the activities described in ORS 811.125 (1); and
(c) Takes place on a highway.
(3) A person who organizes a speed racing event is not in violation of this section if the person has a permit from the road authority for the highway on which the event takes place.
(4) The offense described in this section, organizing a speed racing event, is a Class C felony. [2003 c.550 §2]
If they hit you with this it is not because they merely thought you were speeding. They believe they can articulate that all of you had been together and that you were engaged in one of the requisite acts.
You can try the "dropped the key" argument, but it sounds bogus to me and I suspect it will sound bogus to a judge as well.
But, you might consider asking if you can plead down to a speed offense so as to lessen the penalties. You might also consider consulting an attorney.