Rep. Jeff Leach illustrated to colleagues just how easy it is to place a Texas sports betting wager despite the activity being illegal in the Lone Star State.
Leach told House State Affairs Committee members that during the one hour between his introduction and close on HB 1942, he downloaded an illegal offshore sports betting app and registered for an account from the committee hearing room. He got to the point where he could make a $10 bet on one of Thursday’s NCAA Tournament basketball games and then stopped.
“I have never understood how easy it is to place an online illegal bet, even here at the Texas capitol [building],” Leach said. “… It took me no more than five minutes. It’s that easy.”
Leach’s point was that Texas needs to legalize sports wagering not for the revenue it will provide but for the consumer protections and restrictions of a regulated market.
“We have an obligation and an opportunity right now to put a regulatory framework in place that can allow these hundreds of thousands of Texans to come out of the shadows, to provide the right framework that protects them, that makes this safe and secure, that will devote millions of dollars every year to problem gaming efforts and education across the state.”
The House committee heard more than five hours of gaming testimony Wednesday. That included legislation to legalize brick-and-mortar casinos. The committee left all the gaming bills pending.
Leach will discuss Texas sports betting tax rate, fees
Several committee members pushed back on the 10% tax rate and $500,000 licensing fee in the Texas sports betting bill.
Rep. John Smithee stressed that Texas sports betting operator licenses are very valuable. And he wants the state to get full market value on them.
“I kind of view us in the legislature as having a fiduciary duty of sorts to our taxpayers and to the state, if we’re going to get into this, to maximize the revenue to the state,” Smithee said. “My interest is not in making professional sports franchises wealthy but in maximizing the state’s revenue on this.”
Chris Grove of Eilers & Krejcik presented research that the Texas sports betting market would produce $2.37 billion in gross gaming revenue at market maturity. That would result in approximately $180 million in annual tax revenue under the bill.
Leach said he was willing to work with the legislature to figure out the best rates to benefit the state.
“It’s actually probably a little on the low end, and this is something I’d be willing to negotiate with the members of the legislature,” Leach said. “If that amount needs to be raised, the franchises, members of the Sports Betting Alliance that I’ve spoken with, will be open to that discussion. That fee is going to be whatever the legislature sets it at.”
No big hitters show for sports teams
Representatives of professional sports teams spoke in support of legalizing Texas sports betting. Under HB 1942, online sportsbook operators must partner with 12 sports teams, the PGA Tour or two race tracks.
When Leach filed the bill, the Texas Sports Betting Alliance issued a press release with quotes from Jerry Jones of the Dallas Cowboys, Cal McNair of the Houston Texans, Tilman Fertitta of the Houston Rockets, Jim Crane of the Houston Astros and Ray Davis of the Texas Rangers. But none of those prominent Texas sports team owners came by to lend the issue their star appeal.
Representatives of the Dallas Cowboys, Houston Astros and San Antonio Spurs testified in support of Leach’s bills. But they were lesser executives who wouldn’t inspire the fandom of lawmakers.
The last Texas committee hearing two years ago had a more highly ranked team official in Texas Rangers President Neil Leibman. No one from the Rangers showed up this time. Thankfully, since a committee member jokingly asked if the Rangers count as a Major League Baseball team.
A committee member asked Leach why online sports betting licenses are tied to pro sports teams. Leach responded:
“We believe that these sports franchises are unique situations. They are invested and have been invested in a long time in their communities, in the state’s economy, creating jobs, providing incredible economic development, and we believe that the natural way to go about doing this by way of this framework is to allow them to be the anchors to go out and platform with the platforms.”
Religious organizations oppose Texas sports betting
Many representatives of Baptist organizations spoke out against legalizing Texas sports betting.
Leach said that he is a lifelong Baptist who considers many of those testifying against his bills to be friends.
Leach asked them to remember the words of former US President Donald Trump, for whom he said many of them voted.
“President Trump said ‘When it comes to sports betting, whether you have it or you don’t have it, you have it.’ And he’s right. And in Texas, we have mobile sports betting. There are hundreds of thousands of our constituents, citizens of all ages, including minors, who right now, today, especially with March Madness, are placing unsafe, unsecure, illegal, criminal bets very easily.”
Leach asked the religious organizations to let voters decide if they want Texas sports betting through HRJ 102.
“After everything we just heard, all the disagreement on this issue, which is OK, at the very end of the day can we not agree that the people of Texas deserve the right to vote on this? My hope is that this HJR and its enabling legislation will pass, and I believe the people of Texas will resoundingly support this amendment to the Texas constitution in November.”
Cindi Castilla of Texas Eagle Forum countered that a ballot measure won’t be a fair fight. Texas sports betting proponents would far outspend opponents. She pointed out that this advertising inequity played out when voters approved sports betting in Colorado.
“When we go to the ballot box, we’re going to have giant percentages of spending by the people who will profit off of people’s weakness versus what citizens will be able to put in to fighting this,” Castilla said. “… People want this badly because they want to profit off of Texans. We want to protect them from that.”
Casino legislation includes Texas sports betting
The committee also heard legislation to legalize casinos in Texas. Rep. John Kuempel offered HB 2843 and Rep. Charlie Geren the corresponding HJR 155.
The legislation would authorize eight destination resort casinos spread out around Texas. Licenses would correspond to existing horse racing licenses. Two in Dallas-Forth Worth, two in Houston, one in San Antonio, Corpus Christi and McAllen. Geren said he would offer an amendment for an eighth not within 100 miles of any of the others.
The HJR includes Texas sports betting but lawmakers would need to pass a separate bill outlining the details.
Geren said HJR 155 will add over 100,000 construction jobs and an estimated 70,000 permanent jobs once resorts are fully developed. And it would keep Texans from visiting casinos in surrounding states.
“Every year millions of Texans go to Oklahoma, New Mexico, Louisiana and Arkansas, and they spend billions of entertainment dollars in those states… The joint resolution would not only keep Texas tourist dollars at home, it will also bring massive out-of-state businesses and leisure tourism here to our state because extremely large investment minimums are designed to make sure that the developments which are built will be world-class, iconic structures.”
Gerry Del Prete, COO of Gaming at Fertitta Entertainment, said that 80% of the company’s casino revenue in Lake Charles across the Louisiana border comes from Texans.
Companies such as Las Vegas Sands are looking to buy an existing horse racing license to gain access to the market.
Smithee was among several committee members who questioned representatives of multiple casino companies on the value of a casino license but couldn’t get a straight answer.
The same Baptist organizations that opposed Texas sports betting also spoke against legalizing casinos.
Tribe asks for compact language in bills
Jennifer Hughes, counsel for the Kickapoo Tribe of Texas, said the tribe opposed all the gaming legislation discussed Wednesday.
However, she offered amendments that could get tribal support.
Each bill does try to include the Kickapoo. Leach’s sports betting legislation tries to include the Kickapoo on commercial terms. Hughes said the tribe could only do sports betting under a tribal-state compact under the Indian Gaming Regulatory Act (IGRA).
The casino legislation does refer to a tribal-state compact under IGRA. But Hughes said the tribe wants actual compact language inserted into each proposal.
The Kickapoo is only approved to offer Class I and II games at its gaming facility. This includes bingo, keno and non-banked card games. The tribe has tried for decades to negotiate a compact with the state authorizing Class III games such as slot machines. Sports wagering also is considered a Class III game.
Given the failure to negotiate such a compact with the governor, Hughes wants the legislature to step in.
“We need an agreement with the state under IGRA that is approved by the Secretary of the Interior,” Hughes said. “What we put forth to you is an amendment that would go into the HJR that would spell out essentially a legislative compact agreement and all the elements that would be contained in it.”
Hughes also said the tribal reservation’s location near the Mexico border would put the tribe at a disadvantage and asked for land closer to San Antonio to build a casino.
Leach said he would work with the Kickapoo on the amendment.
Two other Texas tribes, Alabama-Coushatta and Tiguas, don’t even have compacts with the state under IGRA. Nita Battisse, tribal council vice chairwoman for Alabama-Coushatta, opposed the casino legislation for not providing them a pathway.
Texas gambling bills face uphill battle
Leach told PlayUSA last week that he is optimistic about getting Texas sports betting through the House. But Wednesday’s hearing showed there’s still a lot of work to do.
Legalizing gambling in Texas requires a constitutional amendment. That creates a high bar of two-thirds support needed in each chamber. Plus approval from a majority of Texas voters next general election.
The Texas Republican Party recently issued a resolution condemning any gambling expansions, making it more difficult to reach that threshold.
If either the Texas sports betting or casino packages get to the Senate, they face even more resistance.
Lt. Gov. Dan Patrick is the key to passing legislation in the Senate. And he has yet to ever say one good thing about Texas sports betting. Last week he told local ABC affiliate:
“Right now, there are no votes in the Senate. There’s no support I can see. There wasn’t when the session began and there’s not now with the numbers to pass a bill.”