Legalizing casinos, eight-liners — even fantasy sports — all remain long shots for now in Texas as state lawmakers prepare to wrap up their legislative work by the end of May.
There’s still time for plans to allow casinos, electronic machines at horse race tracks or eight-liner machines across the state to heat up, but observers say the push isn’t nearly as strong this year as it has been in the past.
“Most recent legislative sessions have seen an at least halfhearted attempt by the gambling industry to pass legislation that would allow for some form of casino gambling in Texas,” said Mark Jones, a political science professor at Rice University in Houston.
“This session has been different, in that the gambling industry has by and large appeared to have given up any hope of trying to pass legislation that would open up Texas to casino gambling,” he said. “And this lack of legislative effort is taking place within the context of a tight budget, when in the past legislators have been more open to discussing the legalization of gambling as a way to raise additional tax revenue in times of revenue scarcity.”
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But one proposal — declaring that fantasy sports are legal in Texas — appears to have more momentum than most other gaming measures.
“The only potential bright light for the gambling industry in general could be the passage of [this bill], which is a defensive effort by daily fantasy sports companies,” Jones said.
Each session, proposals are filed to expand gaming opportunities in Texas with the goal, supporters say, of generating more tax revenue for the state. Opponents have long argued that casinos and electronic machines won’t generate and sustain the long-term revenue lawmakers need.
They fear that, even if limited, the number of casinos allowed would quickly grow. And they worry that the bulk of revenue generated at casinos would come from local residents who can least afford it — not from out-of-town tourists.
“Conservatives are conflicted between finding new revenue sources for lean budget years and the moralistic ethos that fantasy sports are essentially gambling,” said Brandon Rottinghaus, a political science professor at the University of Houston. “Republicans tend to err on the side of being against what could be perceived as gambling for these moral reasons.
“Conservatives would have more trouble with their base in the next election than the value of the extra revenue from what may be labeled as gambling.”
Here’s a look at some of the gaming proposals in the Texas Legislature this year.
Should fantasy sports be legal in Texas?
There’s a bill in the Legislature that says playing and profiting from fantasy sports is not the same as illegal gambling.
This comes after Texas Attorney General Ken Paxton last year issued a nonbinding ruling stating that online fantasy sports is exactly that — illegal betting.
But state Rep. Richard Raymond, D-Laredo, and state Sen. Lois Kolkhorst, R-Brenham, say online fantasy sports is legal because it’s a skill-based contest where sports fans pay an entry fee, create teams in the sport of their choice and then gain points for their “team’s” performance, such as yards gained in football or runs scored in baseball. Those with the highest scores can receive money on a weekly basis.
FanDuel and DraftKings still operate online fantasy sport sites in Texas.
FanDuel and DraftKings still operate online fantasy sport sites in Texas. FanDuel is only running free contests here. DraftKing, which filed a lawsuit against the state asking the courts to declare that fantasy sports websites are allowed in Texas, continues to allow paid contests, accepting entrance fees, and paying winners.
Raymond’s House Bill 1457, approved by a House Committee, appears headed to the Texas House for consideration. Kolkhorst’s Senate Bill 1970 has been referred to the Senate State Affairs Committee.
There’s plenty of opposition.
“The Texas Constitution clearly prohibits gambling, except for four highly limited exceptions,” Rodger Weems, state chair of Stop Predatory Gambling Texas, told House members recently.
Those exceptions, he said, are charity bingo, charity raffles, the Texas Lottery and parimutuel betting on horse and dog races.
“Passing HB 1457 would constitute an illegal expansion of gambling, in violation of the Texas Constitution,” Weems said. “The other side wants you to believe this bill is something different than it really is. Don’t be taken in by a high-stakes shell game.”
Proposals are filed nearly every session to allow casinos in Texas in coastal areas, rural areas, even metropolitan neighborhoods such as the Stockyards in Fort Worth.
Many say they’d like to keep the money Texans spend at casinos in nearby states here in Texas. In fact, past estimates have shown that Texans spend more than $2.5 billion a year at casinos in states near Texas, and building casinos in Texas could generate more than $1 billion in taxes here each year.
We’re likely to see the Dallas Cowboys move to Tulsa before we see full-scale casino gambling in Texas, assuming the Republicans still control state government.
Brandon Rottinghaus, a political science professor at the University of Houston
Even so, “we’re likely to see the Dallas Cowboys move to Tulsa before we see full-scale casino gambling in Texas, assuming the Republicans still control state government,” Rottinghaus said.
Nonetheless, bills filed this year include:
▪ Allowing gaming at 12 casinos in Texas in counties that approve casino gaming, and letting Texans vote on the issue, has been referred to committee. HB 4136, House Joint Resolution 119
▪ Permitting casino gaming in Texas to generate funding for residual windstorm insurance coverage in coastal areas, and letting Texans vote on the issue, has been referred to committee. HB 2741, HJR 90
▪ Letting taxing units approve tax incentives to develop property for gambling remains in committee, as does a plan to prevent any money in the state’s economic development or enterprise funds from being used to help fund a facility in Texas where gambling would occur. HB 1252, HB 2644
▪ Allowing Texans to vote on whether to let the Kickapoo Traditional Tribe of Texas allow gaming in Texas, plans that have been referred to committee. HJR 59, SJR 39
▪ And letting Texans vote on whether the Legislature should set up a state gaming commission and authorize the regulation of gaming in the state, including letting Indian tribes conduct gaming on Indian land in Texas. That plan, which also would require Gov. Greg Abbott to call the Legislature into a special session to consider gaming proposals, remains in committee. HJR 55
Electronic machines at horse tracks in Texas have long been a source of friction between lawmakers and racing officials.
In 2014, state racing officials approved “historical racing,” the replaying of already-run races on devices with sounds and symbols similar to slot machines.
Supporters said this would help struggling racetracks compete with out-of-state operations. Opponents maintained the machines could bring a form of casino-style gambling to Texas.
Racing officials and conservative lawmakers butted heads over the issue until the Racing Commission voted last year — amid concerns it would lose state funding — to end historical racing in Texas.
This year, state Rep. John Kuempel, R-Seguin, filed HB 3926, which some say would essentially allow the same thing, but call it “purpose-driven parimutuel wagering.” State Rep. Charlie Geren, R-Fort Worth, is among the co-sponsors.
The measure, which dedicates some proceeds to charities to buy body armor for law enforcers and boost death benefits for spouses and families of law enforcers who die in the line of duty, appears to be headed to the Texas House for consideration.
If the bill does pass the House, Jones said the measure may find much more of an uphill climb there.
There also are a few bills addressing eight-liners — electronic devices that offer prizes to winners — that frequently are found in gas stations and other areas across the state.
In Texas, playing eight-liners for cash is illegal, and non-cash prizes are allowed only if they are worth less than $5. Law officials periodically raid these establishments, often confiscating the machines.
Measures to let Texans vote on whether their communities should legalize or prohibit eight-liners, impose fees or create criminal penalties have had hearings but remain in committee. HB 894, HJR 23
There also is a plan regarding criminal offenses on all gambling devices, including eight-liners, which has been referred to a committee for review. SB 106
The Texas Lottery has long been a target for conservative lawmakers.
Lawmakers and Texans alike green-lighted the lottery in the early 1990s, hoping to generate revenue as the state faced a huge budget shortfall.
Since the Texas Lottery began, $25 billion has been generated in revenue for the state, including more than $20 billion for Texas public education and more than $77 million for Texas veterans, lottery records show.
This session, proposed cuts to the Lottery Commission’s budget have officials worried that ticket sales could drop as a result, which means less money would be given back to the state.
The Texas Legislature wraps up business May 29.
At issue is a proposed $18 million reduction to the lottery budget in the Senate and a proposed $6 million cut in the House over the next two years. Both chambers have passed budgets, which now will be hammered out in a conference committee where lawmakers will craft a final version.
Lottery officials say the Senate’s proposed cuts in advertising, marketing and promotions could bring a loss of about $108 million in revenue to the Foundation School Fund, and the House’s cuts could reduce revenue to the school fund by $20 million.
“The Legislature should de-criminalize or legalize all gaming because the state of Texas is in the gaming industry with the lottery,” said Allan Saxe, an associate political science professor at the University of Texas at Arlington. “The state urges us to play the lottery but no casinos, fantasy sports, etc.
“The lottery is a complete game of chance and that standard is used to deprive citizens of other gaming opportunities,” he said. “I believe that what is stopping the passage of other gaming is the lobbying from other states/casinos etc. that simply do not want competition.”
If it’s legal in other states, it should be legal here. And besides, if it remains illegal, it's still going to happen.
That, in a nutshell, is New Jersey’s argument for allowing sports betting at the state’s casinos and four horse race tracks. Last week, a U.S. District Court Judge blocked a law passed by the state legislature, signed by Gov. Chris Christie and supported by a majority of voters in November 2011. The governor said he will take the case to the 3rd Circuit Court of Appeals in Philadelphia.
The case pits the state against the U.S. Department of Justice, the National Football League, National Hockey League, Major League Baseball, National Basketball Association and the National Collegiate Athletic Association. The plaintiffs argue that allowing sports betting in New Jersey would harm the integrity of sports, spur cynicism among fans and violate federal law.
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As Governing's Ryan Holeywell noted last October, although the sports leagues warn of disaffected fans, "that doesn’t seem to have happened so far, despite an estimated $2.76 billion wagered on sports in Nevada in 2010, according to the American Gaming Association -- not to mention countless office pools on college hoops."
Part of what rankles legalization supporters is the fact that sports betting is already legal in four states: Delaware, Montana, Nevada and Oregon. Those states were grandfathered in when Congress passed the Professional and Amateur Sports Protection Act in 1992, which prohibited sports wagering in all other states. A provision in the law gave New Jersey a one-year window to legalize sports betting, but the state let that window close before taking action.
“There is no reason why Nevada can have sports gaming and we shouldn't,” Christie said in his response to his state’s loss in federal court last week.
Aside from the fairness issue, what’s at stake in legalizing sports betting? “Proponents of sports betting have said New Jersey is losing millions of dollars in potential revenue to offshore operations [and] organized crime,” reportsThe Newark Star-Ledger.
“Perhaps it is this dire financial portrait that has reframed the debate about legalizing new forms of gambling in New Jersey,” writes Tara Nurin of WNYC, an NPR affiliate in New York. “No longer do lawmakers bother to challenge them on the grounds of moral ambiguity, their addictive allure, or their potential threat to the financial well-being of families. Now the arguments begin and end with economics.”
The Newark Star-Ledger’s Steve Politi offers just that kind of economic rationale for why the state should leverage sports betting to raise new money. “Legalized sports betting has never made more sense than in the aftermath of Hurricane Sandy,” Politi writes. “Atlantic City was among the hardest hit areas, with a chunk of its iconic boardwalk washing away in the storm. Sports betting is not only a way to tap into new revenue for the rebuilding efforts -- it is expected to generate $150 million a year in taxes and fees -- but could also help fill casino hotels during the biggest sports weekends.”
But The Philadelphia Inquirer’s Patrick Kerkstra puts that potential revenue gain into context, arguing it isn’t all that much in the grand scheme of all things gambling and revenue related.
“Potential profits from sports betting are small compared with the industry's problems,” Kerkstra writes. “Atlantic City casinos are netting about $2 billion less in annual gaming revenue today than in 2006. Sports betting would generate only about $200 million, or a tenth of the gaming business Atlantic City has lost in the last five years to competitors and the lousy economy. Adjusting for inflation, casino gaming profits are at their lowest levels since the 1980s. On its own, legal wagering on Eagles games won't begin to reverse the trend.”
Two other reporters at The Philadelphia Inquirer, Suzette Parmley and George Anastasia, also emphasized the relatively small gains possible from sports betting, using Las Vegas and Nevada as reference points.
“Proceeds from sports wagering make up a small fraction of total gaming revenue in Las Vegas, representing only 1.2 percent of the $5.8 billion produced by the 42 casinos on the Strip in 2010,” Parmley and Anastasia write. “The ratio was similar statewide, with sports-betting revenue accounting for less than 2 percent of the total $10.4 billion wagered in Nevada.”
But even if the money isn’t all that much, is it fair to deny New Jersey that extra boost?
“London -- which has at least one betting parlor on every major street -- managed to hold an entire Olympics without any problems, while offering bets on everything from Usain Bolt winning the 100 to Michael Phelps getting seven golds,” writes Tim Dahlberg, a columnist for The Associated Press. “The NFL, meanwhile, hosts a game in London every year and hasn't complained yet about fans being able to bet their favorite on their way to the stadium.”
Realists in the pro-sports betting camp have tried to persuade the opposition with a different argument: It’s going to happen anyway, so it might as well be regulated by the state.
“The reality is that people want to bet on games and will do so whether it's legal or not,” Dahlberg writes.
Reporting by the Inquirer seems to back him up. “Bookmakers don't see Atlantic City as a threat,” Parmley and Anastasia write. “If anything, they say, legalized sports betting could bring them new customers. Most illegal bookmakers allow customers to gamble on credit, something legal sports-betting operations cannot do.”