Four gambling bills received hearings Wednesday in the Texas House State Affairs Committee.
Two bills centered on online sports betting, and two concerned commercial casinos and retail sports betting.
The 2023 Texas Legislature has filed multiple bills in both chambers seeking to permit Texas online sports betting and Texas casinos. All require constitutional amendments to become law. These four are the first to receive committee hearings.
Texas online sports betting
Rep. Jeff Leach, R-Plano, led off the day by introducing the first of two pieces of Texas online sports betting legislation, House Bill 1942. HB 1942 represents the enabling legislation for House Joint Resolution 102, which would amend the Texas Constitution to permit online sports betting.
In contextualizing his bill, Leach acknowledged the 35 states that have already legalized sports betting since the revocation of the Professional and Amateur Sports Protection Act (PASPA) in 2018.
“It’s clear that wagering on sports is here to stay,” Leach said. “But it’s being done in the shadows with no protections, privacy or recourse.”
Leach further emphasized the need for a legal market by citing the $7 billion in offshore bets placed last year in Texas and the “hundreds of thousands of Texans who are criminals under the Constitution” due to their betting habits.
While Leach did comment on how legal sports betting revenue would serve the state (98% going to lowering property taxes), his position focused on combating the illegal market that already grips the state.
Committee questions honed in on licensing fees, sale of sports betting licenses
Rep. John Smithee, R-Amarillo, turned the discussion to sportsbook licenses, which HB 1942 pre-authorizes for the state’s 12 pro sports teams, two race tracks and the PGA. If one of those entities does not want to operate a sportsbook, it can give the license to a designee.
The transfer of said license to a designee led Smithee to question the market value of those licenses and whether “a designee could pay a franchise to become a designee.” This question recurred several times throughout the session, regarding sports betting and casino licenses.
The committee also seemed unsure about taxing sports betting based on “adjusted” gross gaming revenue (AGR). AGR typically represents the amount a sportsbook takes in bets minus its payouts and promotional money given to new bettors. Lawmakers appeared dubious of using this metric as a basis for levying taxes.
Questions were raised about the competitiveness of the bill’s 10% tax rate, and Leach affirmed, “I am willing to have flexibility on that.”
Usual proponents and opponents spoke on Texas online sports betting
Senior members of various Texas pro sports teams, including the Houston Astros, San Antonio Spurs and Dallas Cowboys, spoke in favor of the bill, citing “a $7 billion offshore market” and “the competitive disadvantage facing Texas teams” that cannot benefit from sports betting revenue.
The Texas Sports Betting Alliance (SBA) and Penn Gaming, which owns Barstool Sportsbook, also testified in favor of HB 1942.
Scott Ward, a representative for the Texas SBA, invoked the 2.85 million failed transactions made by Texans on other states’ legal sports books over the 2022 NFL season.
Eric Schippers, senior vice president of government affairs for Penn Gaming, continued the assault on the offshore market, which he claimed “captures 40% of all bettors.”
On the other side of the bill, opponents from religious organizations such as the Christian Life Commission, Southern Baptists of Texas Convention and other faith and family groups noted “associations between gambling and family violence” and referenced other states such as Illinois and New Jersey, where major upticks in gambling addiction cases have been noted since the legalization of sports betting.
Rob Kohler of the Christian Life Commission also warned the committee that allowing sports betting “would break the seal on Category III gaming.” This, he claimed, would allow tribes to petition for Class III gaming licenses that go beyond sports betting and could lead to in- and out-of-state tribes claiming tribal land in trust where they could place any kind of gaming facility they want.
Tribes withheld support for sports betting but put forth amendments
Jennifer Hughes, acting as counsel for the Kickapoo Tribe of Texas, expressed opposition to the sports betting bill unless it had an amendment “containing necessary language to allow sports betting” on tribal lands.
Hughes cited the need to include language invoking the Indian Gaming Regulatory Act (IGRA), which would allow tribes to form tribal compacts with the states to allow sports betting. Such language, she said, “is the only way to hold tribes accountable” in supporting their communities.
Leach closed with his religious affiliation and a Trump quote
After a lengthy two-hour discussion, Leach closed by citing his Baptist bona fides to curry favor with the religious contention, and returned to the ubiquitous illegal sports betting market.
“I’m going to end with a sports betting quote by Donald Trump, who I know a lot of you voted for,” Leach said. “Whether you have it or don’t, you have it.”
Texas Commercial Casinos
Rep. Charlie Geren, R-Fort Worth, introduced House Joint Resolution 155.
HJR 155 allows for resort casinos in Texas licensed through pari-mutuel race tracks in major Texas metropolitan areas. These tracks control the licenses, and, similar to sports betting licenses, can either be used by the tracks to build a casino or given to a “designee” to do the same.
Casino developers, depending on the size of the metro area, would have to commit between a $1 billion-$2 billion investment in the first five years as a condition for a license.
Geren set the focus on “remaining true to the larger purpose of destination resorts whose benefits would outweigh their costs.”
Geren cited data that showed “two-thirds of Texans have shown support for resort casinos,” a figure PlayTexas has previously found through public survey.
Committee fixates on maximizing revenue
Many of the committee’s questions were presented to Chris Hughes, who spoke on behalf of Las Vegas Sands, the casino-focused PAC that helped draft the bill and has donated millions to Texas politicians over the past few years.
“If a racetrack sells its license to a designee,” Rep. Richard Peña Raymond, D-Laredo, asked, “who keeps the money?”
Hughes said the racetrack. He also was asked about the fair market value for a casino license but wasn’t able to provide an answer.
Smithee stressed that lawmakers “need to ensure that these license fees return to Texans and not to people running sportsbooks or horse racetracks.”
Hughes was also asked whether “Las Vegas Sands had a vested interest” in procuring one of the eight casino licenses established in Geren’s legislation. He confirmed that it did.
Hughes concluded by citing some estimates from Innovation Group, a business services company, on a “fully built out” Texas casino market:
“We’re looking at $9 billion a year in gross gaming revenue when fully built out as well as $1.35 billion in gaming tax revenue,” Hughes said.
Similar range of proponents and opponents spoke on Texas casinos
Gerry Del Prete, representing the Houston Rockets, whose owner, Tilman Fertitta, owns Golden Nugget casinos and has casino interests on the Vegas Strip, spoke in favor of HJR 155. Del Prete confirmed that Texans heavily traffic neighboring states’ casinos, including Fertitta’s Lake Charles Golden Nugget, whose customer base is 80% Texan.
Raymond asked Del Prete to compare HJR 155’s 15% tax rate to Louisiana’s 25% rate.
“Are we coming in too low?” Raymond asked.
“Well, the lower rate is helpful,” Del Prete explained, “for developers who are committing over $2 billion to building casinos. That initial investment wasn’t an issue in Louisiana.”
Kirk Hendrick, chair of the Nevada Gaming and Control Board, spoke on House Bill 2843, the enabling legislation to HJR 155, and fielded several questions on whether Texas casino legislation gave regulators sufficient power to regulate casino gaming.
“Your legislation gives regulators broad powers,” Kendrick assured the committee. “It’s a very strong bill.”
Kendrick said Geren and Rep. John Kuempel, who sponsored HB 2843 with Geren, took the Nevada casino gaming compact, which was 70 years old and had been updated and optimized numerous times, and “used the top-line regulations from that compact to write your bill.”
Opponents again featured the same religious groups that identified the addictive nature of gambling and its deleterious effects on the community.
A speaker on behalf of the Southern Baptists of Texas reminded the committee that “this issue directly concerns us because we are the ones running addiction recovery groups and creating spaces for people who’ve lost everything due to gambling addiction.”
Mary Smith of Concerned Women for America, highlighted problem gambling and women.
“In the 45-64 age demographic,” Smith said, “problem gambling disproportionately affects women.”
Tribes showed minimal support for casino legislation
The Alabama-Coushatta Tribe and the Kickapoo opposed HJR 155 and HB 2843, citing insufficient provisions for tribal gaming.
Nitta Battisse, vice chair on the tribal council of the Alabama-Coushatta Tribe, said, “We do not see all three tribes represented under HJR 155.”
Battisse was referring to language in the bill that only acknowledges casino provisions for Texas tribes under IGRA. The Alabama-Coushatta and the Tiguas Tribe are not under IGRA.
Jennifer Hughes, speaking again on behalf of the Kickapoo Tribe, which does operate under IGRA, argued that HJR 155 “would be economically disastrous for our tribe due to the land locale.” The Kickapoo operates out of Eagle Pass on the Mexican border, roughly 150 miles from San Antonio.
“Most of our customers come from San Antonio,” Hughes said. “Under this bill, San Antonio would receive a casino license. If they do, who is going to drive two hours to Eagle Pass? That’s why we’re proposing an amendment giving us a different site to create a casino closer to San Antonio.”
“Would this site be on tribal land?” Raymond asked.
“No,” Hughes said. “This amendment calls for a state law granting the land in the name of equity under the law.”
Along with the amendment to add a closer casino site for the Kickapoo, Hughes also proposed an amendment “granting more concrete IGRA considerations” for the tribe.
Committee concerned with competitiveness and the secondary market for licenses
States such as Nevada and Louisiana provided the committee with regular points of comparison in assessing the integrity of online sports betting and commercial casino legislation.
Leach, Gueren, Kuempel and other proponents fielded numerous questions about how tax rates and licensing fees had been arrived at and whether they were comparable with other states.
The issue of licensing fees and the sale of casino and sports betting licenses provided particular consternation to the committee and appears to be one of the most important details to iron out for the committee to rule favorably on any gaming bills. Rep. David Spiller, R-Jacksboro, said it succinctly,
“If a racetrack pays $1 million for a license and sells it on a ‘secondary market,’ let’s call it, what’s it going to sell for? Ten million? Twenty million?” Spiller asked. “That license is an asset to the people of Texas, and they should benefit from its sale.”
All four bills were left pending in committee and likely will not be voted on until amendments are added and some key questions about licensing get answered.