Opinion: How Texas Interest In Sports Betting Grew Bigger In 2021

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Texas sports betting

In mid-January, Legal Sports Report reported that according to multiple sources, sports betting might be on the legislative agenda in Texas. Lieutenant Governor Dan Patrick, however, says it is not happening.

The legalization of TX sports betting would be something of a unicorn for the sports betting industry, much like California, Florida, and mobile betting in New York. It’s an idea long viewed as out of reach.

But an effort to legalize sports betting in Texas might be the rarest feat of any of the big states left. Despite the long history of opposition, a handful of bills have been filed during this legislative session.

Gaming infrastructure in Texas

Regulated gaming in Texas is sparse. Though the Kickapoo Lucky Eagle Casino in Eagle Pass, Texas is a significant property, there is very little regulated gaming in the state.

Presently, the only regulated casino gaming options occur on tribal land as Texas law prohibits commercial casino operations.

The state does allow horse racing, but the absence of gambling in Texas is perhaps most notable driving north on I-35 where Texans are greeted by an abundance of casinos just across the Oklahoma border.

The Adelson factor

The rumored driving factor for change, however, emerged in late 2020 before the passing of casino magnate Sheldon Adelson. After his passing, the Texas Tribune reported that Adelson’s Las Vegas Sands had hired 51 lobbyists to push to open the Texas gambling market.

While the Tribune makes clear that it is uncertain just how much momentum Sands’ push into Texas has, the catalyst that sparked the interest of some ears in Austin appears to be the commonly cited need to raise revenue after the beating to state coffers that the coronavirus has dealt.

Though Texas’ shortfall appears to have been less than was forecasted, which may stall the urgency. The push to add casinos still appears to face opposition in the legislature, with some arguing that the best possible outcome would be for it to end up on a ballot measure.

Texas sports betting is a different animal

There is still a very long way to go for Texas to come on board.

The governor purportedly reached out to lobbyists and other state regulators with inquiries. The push to add sports betting apparently has the backing of the major professional franchises in the state. Dallas Mavericks owner Mark Cuban has long advocated for legalized sports betting, but he has reportedly been joined in his support by the Dallas Cowboys and Jerry Jones.

Rockets owner Tilman Fertitta is of course owner of the Golden Nugget.

The long-running daily fantasy sports saga

Casting a shadow over the Texas sports betting discussion is the saga that involved daily fantasy sports in Texas following Attorney General Ken Paxton’s ruling that daily fantasy contests violated state gambling laws.

Following the release of the opinion in January 2016, FanDuel announced that they would leave the state in May, whereas DraftKings sought to challenge the opinion. After a roughly two-year absence, FanDuel announced its return to the market, reporting at the time:

Considering a variety of factors related to the operation of daily fantasy sports in Texas, we have re-entered the market, while the issue is being resolved by the state.

Despite the non-binding pronouncement of the state’s attorney general, the Austin American-Statesman reported a quote from state Rep. Joe Moody that upwards of 4 million Texans had participated in daily fantasy sports. Despite the popularity of DFS in the Lone Star State, there is surprisingly little discussion of including the contests in at least one of the sports betting bills.

Sources of prohibition

According to the State Law Library of Texas Article 3 Section, 47 of the state Constitution requires the Legislature to pass laws that prohibit lotteries and gift enterprises.

The Constitution does allow for the state to operate lotteries.

The state’s Penal Code and Occupations Code fills in the constitution’s blanks, leaving one of the most restricted landscapes for gaming in the country.

Long odds but could sports betting comes to Texas?

Despite the long odds of Texas getting anything done on sports betting this year (or in the near future,) Democrat Harold Dutton introduced a sports betting bill in the Texas legislature in January.

The bill, H.B. 1121, would authorize the Texas Commission of Licensing and Regulation to oversee Texas sports betting through the state lottery.

The initial application fee is set at $250,000 with renewals costing $200,000, and appears to advocate for a market with at least five competitors, though the bill provides for the executive director to exceed that number.

The tax rate is set at 6.25%. The stated objective of the licensing regime, like we have seen in other jurisdictions, is said to be to “maximize revenue to the state.”

In this era of a cash crunch, the Texas bill would direct funds to the state’s Foundation School Fund.

The big things that appear missing from the Dutton bill are any treats for the sports leagues. There do not appear to be any integrity fees or official data mandates. In fact, this Texas bill in many ways appears to be very similar to West Virginia’s legislation.

Competing bills?

Texas Rep. Dan Huberty has introduced additional legislation last week. HB 2070 is not quite as friendly to consumers or the gaming industry as Dutton’s bill, as it has a higher tax rate.

The Huberty bill also has a double-dip, of sorts, for pro sports teams. Texas teams can elect to be operators, and leagues would get an official data mandate.

Additionally, there was a joint resolution introduced by Huberty this week that would put the legalization of sports betting to the voters of Texas as a constitutional amendment to be voted on in November 2021.

What to make of this?

Texas seriously considering sports betting is a positive for the industry. Dutton’s bill was refreshing, however.

Given what recent bills have looked like with high licensing fees and data mandates, his bill appears almost too good to be true. Coupled with the Lieutenant Governor’s opposition, and now a competing league-friendly bill, the industry-friendly bill is almost certainly not going too far.

In reality, neither one of these proposals is likely to go far without the support of Patrick. But these bills might be an important step in the right direction in finally bringing regulated sports betting to the Lone Star State.

Even though TX sports betting is likely a few years off, this might be the closest the state has come since the fall of PASPA. In the coming weeks, more bills are likely to be filed, perhaps with some being tied to expanded casino gambling.

However, both casino betting and sports betting face significant obstacles in Texas.