Rep. Charlie Geren, R-Fort Worth, has filed Texas’s second piece of casino legislation in an effort to bridge gaps between the state’s existing gambling stakeholders. His resolution, House Joint Resolution 97, gives priority to Texas’s parimutuel racetracks, and increases the number of resort casino licenses offered in existing legislation.
Texas commercial casinos are currently illegal under the state constitution, and the state has only one tribal casino in Eagle Pass, Texas, on the Mexican border. Any casino legislation would require a constitutional amendment and a two-thirds majority vote in both houses of the legislature to reach a November ballot.
Geren’s legislation receives backing of major casino industry groups
Geren’s legislation comes roughly three months after Sen. Carol Alvarado, D-Houston, filed similar casino legislation (Senate Joint Resolution 17) in the Texas Senate. While both focus on “destination resorts” and call for the creation of the Texas Gaming Commission, Geren’s legislation does more to work with the pari-mutuel racing industry, potentially giving it broader statewide appeal.
As such, HJR 97 has received the sponsorship of the Texas Destination Resort Alliance (TDRA), which itself is backed by the Las Vegas Sands group. Both the TDRA and Sands made major pushes to legalize commercial casinos during the 2021 legislative session but came up short–receiving only one committee hearing in the Texas House of Representatives.
In 2021, COVID protections and a devastating winter storm that shut down Texas’s power grid received the immediate focus of state legislators, and casino gaming legislation got pushed to the margin. Without a sense of urgency, Sands’s extensive lobbying and advertising efforts couldn’t get gaming legislation off the ground.
With no such pressing issues this session, The TDRA and Sands have less to wade into and the benefit of being a known commodity in Austin. However, they’ve also taken the extra time to re-tool their legislation, bringing Texas horse racetracks on to a level playing field with other casino developers.
In 2021, their legislation offered up to three Class-II casino gaming licenses for “limited casino gaming” at pari-mutuel horse racetracks. This time around, racetracks are not relegated to limited Class-II licenses; they can apply for full-scale Class-I “resort casino” licenses, the same as any other casino developer.
Andy Abboud, Sands’ chief VP of government relations said in an interview with the Texas Tribune,
“[The new proposal] brings everyone together, by and large, that in some ways were divided last time. We have a much broader coalition of people behind this.”
How do the state’s two casino resolutions stack up against one another?
The central purposes of both SJR 17 and HJR 97 overlap almost completely. Succinctly stated, those purposes are:
- The development of high-end resort casinos to foster economic growth
- The creation of a new Texas Gaming Commission to oversee the regulation of the casino industry
- Allowance for retail sports betting
Where they differ, and where Geren’s legislation may have the upper hand, is in the expanded allowances for Class-I gaming licenses. In fact, Geren’s legislation does away with the class-based distinction altogether.
Licensing Structures in HJR 97 and SJR 17
In laying out the licensing structures of both pieces of legislation, it should be noted that Rep. Geren’s resolution will feature enabling legislation to clarify enforcement policies that are forthcoming and expected to be filed by Rep. John Kuempel, R-Seguin.
Currently, Texas has four operational pari-mutuel horse racetracks: Sam Houston Race Park in Houston, Lone Star Park in Grand Prairie, Retama Park outside San Antonio, and Gillespie County Fairgrounds in Fredericksburg. There are also three greyhound tracks in LaMarque, Corpus Christi, and Harlingen.
At present these are the allowances made by both resolutions for casino licenses.
- Up to four Class-I licenses to operate resort casinos in the state’s four largest metropolitan areas: Dallas, Houston, Austin, and San Antonio
- Up to three Class-II licenses to operate limited casino gaming at pari-mutuel horse racetracks in three different metropolitan areas
- Up to two Class-III licenses to operate limited casino gaming at pari-mutuel greyhound racetracks
- Up to seven Class-I licenses to operate resort casinos where pari-mutuel racing had been approved by Jan. 1, 2022 and including the following breakdown:
- Up to two licenses for the Dallas-Arlington-Fort Worth metro area
- Up to two licenses for the Houston metro area
- One license for the San Antonio-New Braunfels metro area
- One license for the Corpus Christi metro area
- One license for the McAllen-Edinburg-Mission metro area
By doing away with all Class-II and Class-III distinctions, Geren’s resolution gives pari-mutuel racetracks a bigger piece of the pie and uses some of the already established licensing and regulatory frameworks for racetracks to guide casino licensing. One stipulation though is that a greyhound track would need to cease all racing activities if it applied for and received a casino license.
Single versus differentiated tax rates
Geren’s legislation calls for a single “15% tax on the gross casino gaming revenue” while Alvarado’s legislation differentiates taxes between table games and slots.
Under her resolution, table games would be taxed at 10%, while slots would be taxed at 25%. This breakdown is consistent with other states with legal casino gaming.
In the end, Geren’s tax rate probably splits the difference between Alvarado’s dual rates. However, Geren’s legislation singularly provides further consideration for the horse racing industry in the way revenue is distributed. An undisclosed percentage is to be returned to racetracks for purse money “to promote the growth and sustainability of the horse racing industry in the state.”
In light of the ongoing regulatory clash in the Texas horse racing world, such revenue would not only promote growth but may outright save the industry.
On the sports betting side, both resolutions only note that they would “impose a tax on sports betting revenue.” No specifics have been provided.
Under HJR 97, licensing fees fund the Texas Gaming Commission
The Texas Gaming Commission, created through both resolutions, would regulate the casino and sports betting industries and possibly approve applications for licenses along the way. The TGC would comprise five members, appointed by the governor with the counsel of the senate, and serve staggered six-year terms.
As we’ve seen in other states, gaming regulators work tirelessly in the months leading up to launch and continue to pay close attention post launch to such things as implementation of responsible gaming practices, placement of gambling ads and filing of revenue reports.
Alvarado’s legislation does not specifically account for the funding of this commission while Geren’s does. Depending on the metro area, HJR 97 calls for the following licensing fees to be paid by all licensees to the TGC:
- Dallas-Fort Worth and Houston licensing fee: $2.5 million
- San Antonio-New Braunfels licensing fee: $1.25 million
- Corpus Christi licensing fee: $500,000
- McAllen-Edinburg-Mission licensing fee: $250,000
The legislation does not specify if and how often these licensing fees would need to be renewed.
Legislative session showing fewer roadblocks to gaming legislation
After two years of extensive lobbying and educating on behalf of groups like Sands, the TDRA and others, Texas legislators are presenting fewer roadblocks to passage of gambling legislation. House Speaker Dade Phelan has been a proponent for the last two sessions, Gov. Greg Abbott has warmed to the idea of upscale resort casinos and even Lt. Gov. Dan Patrick has moved away from categorical disapproval to a more observant wait-and-see approach. For his part, Geren has received the title of Speaker Pro Tempore of the Texas House, giving added clout to his legislation on file.
Aside from support from some of Texas’s highest ranking lawmakers, multiple billionaire sports team owners, including Mark Cuban, Tilman Fertitta and Jerry Jones, have all jumped on board.
With Geren’s legislation now on file, another unlikely billionaire supporter may be on board. The Chickasaw Nation of Oklahoma who own and operate the Winstar World Casino and Resort–the largest casino in the world–have a subsidiary group, Global Gaming LSP, who purchased Lone Star Park in Arlington in 2011. HJR 97 would allow them to expand their casino industry into Texas, and led them to comment,
“We look forward to engaging with [the] Legislature about the economic benefits and tens of thousands of jobs destination resorts will bring to the Lone Star State.”
Perhaps, though, the largest roadblock to expanding casinos into Texas is the state’s current $33 billion budget surplus. How legislators interpret this massive short-term windfall against the smaller long-term revenue streams from legal gambling may mark the biggest waypoint in the trajectory of casino legislation in 2023.