Breaking Down Texas’s Online Sports Betting Legislation

Written By Rashid Mohamed on February 13, 2023 - Last Updated on July 21, 2023
What in Texas' mobile sports betting legislation?

A pair of identical bills to legalize online sports betting in Texas were filed on Feb. 7 in the House and Senate at the Texas Capitol. Unlike similar legislation filed in 2021, HB 1942 and SB 715 would only allow online sports betting, not in-person betting.

Rep. Jeff Keach and Sen. Lois Kolkhorst sponsor the bills. They have strong backing from the Sports Betting Alliance, a coalition of professional sports franchises, leagues, racetracks and sportsbook operators. Under the proposals, the Texas Lottery Commission would oversee the program.

Bills emphasize that sports betting is a privilege, not a right

Polling shows that the majority of Texans support sports betting. The Lone Star State could be in a race to legalize sports wagering before neighbor Oklahoma beats them to it.

The legislation creates a regulatory framework for online sports betting in Texas. The measures include licensing requirements, authorizing fees, consumer protection measures, and stringent penalties for non-compliance.

On the surface, the legislation would help deter unlawful sports wagering in the state, provide more regulatory and law enforcement oversight and generate revenue for the state. The bills emphasize that mobile sports betting in Texas is a privilege, not a right. As such, the measures stress strict regulatory oversight to safeguard the integrity of wagering on sporting events, ensure accountability and gain the public’s trust. 

Tax rate on sports betting would be 10% under proposals

Subchapter F of HB 1942, “Wagering Revenue Tax,” stipulates that a tax is to be imposed on the adjusted gross revenue of an interactive sports wagering operator. 

To determine what an operator’s adjusted gross wagering tax revenue would be, the operator must tally the total amount of wagering revenue received from all sports wagers. An exclusion is wagers on free bets or promotional credits (“no sweat bets”, “deposit match bonuses”, “sign-up bonuses”, etc.). 

The rate of tax to be imposed is 10% of the adjusted gross wagering revenue for a reported period. The tax imposed will be paid to the comptroller on or before the 20th day of the month following the month in which the adjusted wagering revenue was received. 

Operators required to pay a tax under this subchapter will have to file a tax report with the comptroller. This tax report will be due the same day the tax is due. A few important details operators must include: 

  • Total amount of gross wagering revenue received from all authorized sports wagers
  • The total amount of cash or cash equivalents the operator paid as winnings to players during the reporting period
  • Cash value of any bonuses or promotional credits given to players that return to the operator in the form of a deposit or wager

RELATED: Allowing Promo Credits Could Cut Texas Sports Betting Tax Revenue In Half

Legislation allows 15 online sports betting applications to pro sports teams

The legislation allows for 15 online sports betting applications given to the states professional sports teams (called “sports entities” in the legislation), plus the PGA and two horse race tracks. Each of the following could partner with one interactive sports betting platform provider:

  • Dallas Cowboys
  • Houston Texans
  • Texas Rangers
  • Houston Astros
  • Dallas Stars
  • Austin FC
  • FC Dallas
  • Houston Dynamo
  • San Antonio Spurs
  • Dallas Mavericks
  • Houston Rockets
  • Dallas Wings
  • PGA Tour
  • Lone Star Park 
  • Sam Houston Race Park 

Permitting fee is half a million dollars

The legislation specifies that the Texas Lottery Commission shall issue not more than one interactive sports wagering permit for each sports entity. To obtain a wagering permit, the online operator (DraftKings, FanDuel, BetMGM, etc.) must state who they are partnering with, submit a complete application to the commission and pay a permitting fee of $500,000. This fee is refundable should the application be denied. 

The commission may issue a permit only to a US-based sports entity. Applicants must submit the following:

  • An initial business plan that includes the different types of sports wagering the operator plans to offer
  • Proposed measures to address age, identity verification and geolocation requirements
  • Proposed internal controls to prevent ineligible persons from participating in sports wagering
  • Applicant’s history of preventing problem gambling, including training programs for its employees
  • A written information security program that includes a designated chief security officer
  • A single sports wagering brand which the interactive sports wagering operator intends to engage with the public
  • Any personal information the commission deems necessary about the applicant’s key persons as well as any other information the commission considers relevant. 

An operator could also request a service provider permit. These permits cover third party agencies, such as those that provide geolocation services and identity verification, by submitting an application to the commission and paying $25,000. They must also furnish the following:

  • Applicant’s background in sports wagering or a covered service
  • An applicant’s experience in connection with sports wagering or other wagering activities
  • Applicant’s written information security program
  • Personal information or otherwise the commission deems necessary

Permits can be renewed and must be done at least 60 days before the expiration date of a permit. The permit-holder must include a renewal fee in the amount of $100,000 for an interactive sports wagering permit or $10,000 for a service provider permit. 

An executive director would manage the program

Under HB 1942, the Texas Lottery Commission would establish an interactive sports wagering program and issue permits to operate sports wagering on authorized sporting events. It would then appoint an executive director to administer and enforce the regulations laid out in the legislation. 

Further duties of the commission include: 

  • Each month, the commission will provide the comptroller with a complete statement of sports wagering revenue and expenses for the preceding month
  • By Sept. 30 of each year, provide the comptroller with a complete statement of sports wagering revenue for the preceding year
  • Conduct independent audits of interactive sports wagering operators and service providers
  • Establish a statewide self-exclusion list that allows individuals to register on the commission’s website, and set up safeguards to ensure these individuals refrain from betting.
  • Impose strict penalties on persons who engage in sports wagering in violation of rules laid out in the legislation. An offense is a Class B misdemeanor. 

Bills address problem gambling

Interactive sports wagering operators must also provide information about or links to resources related to problem gambling and prevention. It must include a toll-free crisis helpline approved by the commission.

Besides the commission establishing and administering a statewide self-exclusion list, each interactive sports wagering operator must provide information on the procedures for individuals to request to be added to the list. Operators and permit-holders must make reasonable attempts to cease all marketing efforts to individuals in the voluntary exclusion program. 

Training programs on problem gambling will also be arranged by the commission.

Bills would allow betting on college sports and esports

Wagering on all professional sporting events in Texas would be OK under the bills. That includes athletic events in the NFL, NBA, WNBA, MLB, MLS and the NHL. 

Betting on college sports would also be legal, including Texas teams. The legislation also allows betting on annual professional golf tournaments, racetracks, esports and fantasy sports contests, to the extent these contests are authorized by law. 

Wagering on youth sports (athletes below the age of 18 in prep sports and high school sports) would remain illegal.

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Rashid Mohamed

Rashid Mohamed is an international journalist with a special interest in sports writing. He contributes regularly to PlayTexas, focusing on both the pathway to gaming legalization and the underground market in the state. He is a Poli-Sci graduate of Ohio University and holds an A.A.S in Journalism. He has worked in a number of countries and has extensive experience in the United Nations as well as other regional, national, and international organizations. Rashid lives and writes out of Denver, Colorado.

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