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This is only an educated guess, but back in the early part of the 20th century, the main street in any given town was referred to as "the main drag". Since organized drag racing grew from street racing, if you challenged someone to race from one intersection to the next, you are racing on the "main drag", thus "Drag Racing". Now why the street in town was called the "main drag", well, that is another question to be answered elsewhere.

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