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.”
Texas has 30,000 to 150,000 illegal slot machines that make an estimated $1.9 billion annually, according to the Texas Lottery Commission, which runs the state-approved lottery. The slot machines — known as eight-liners, for the variety of lines that need to match up for a player to win — are often hidden in abandoned or fake businesses, and have turned up in spaces that from the outside appeared to be karate schools, car dealerships, lawn mower repair shops and, in the South Texas town of Alton last year, a molecular lab.
“It’s like the poor man’s speakeasy in Texas,” said Richard B. Roper III, a former federal prosecutor who oversaw a 2007 case that shut an Amarillo gambling room that made up to $4,600 weekly and whose operators bribed a law enforcement official to avoid being raided. He added, “If the guy’s willing to pay off a cop, there’s got to be some money to be made.”
Some of the machines the authorities have confiscated in raids have official state tax decals — the Texas comptroller’s office collects $10 million annually on eight-liners, pool tables and other devices as part of a coin-operated machines tax. But state officials have no idea which slot machine operators are making illegal cash payouts, saying it is up to local authorities to enforce gambling laws.
Yet many local officials lack the resources and the will to prove whether cash is being exchanged. And some communities have had even less incentive to investigate gambling rooms since officials began requiring casinos to pay for costly permits, bringing in revenue to needy cities and counties.
Workers at two gambling rooms on Highway 83 in Starr County — one in the former tire shop and the other in a renovated gravel warehouse, both of which openly paid players in cash during a visit in February — claimed to have county permits but declined to comment further. “You’re not a cop, right?” a worker at one said. “Then we don’t have to talk to you.”
Starr County charges eight-liner operators $500 per machine, through an annual licensing fee approved by the County Commissioners’ Court last year. Starr County’s top elected official, County Judge Eloy Vera, did not respond to requests for comment, but he told a local television station, KGBT, that the fees generated $1.7 million.
“They frankly are turning a blind eye to illegality,” said the county attorney, Victor Canales Jr., who opposed the ordinance allowing eight-liner permits. “As pretty much everybody in the county knows, there are cash payouts. You see postings on Facebook of people winning.”
The industry has grown so large, particularly near the border, that it has attracted the attention of the federal Department of Homeland Security. And it has injected an illicit attraction into small towns that now hum at all hours with a scaled-down Las Vegas Strip experience of chiming slot machines, free all-you-can-eat buffets and uniformed security guards.
The gambling room on Highway 83 at the renovated gravel warehouse featured at least 100 machines; a giant, sparkling chandelier; pictures of Marilyn Monroe on the red walls; and free hot dogs. Dance music blared. One gambler wore medical scrubs.
Esperanza Salinas, 70, a retired middle-school teacher, went there with her 72-year-old husband, Jorge Salinas, and her brother-in-law, Armando Salinas Jr., 68, a former city commissioner in the town of Elsa. When she is not busy deer hunting or volunteering at her church, Mrs. Salinas said, she gambles on eight-liners about twice a month.
That February afternoon, the three of them spent a few hours gambling at the renovated tire shop and gravel warehouse. Mrs. Salinas lost $70, while her brother-in-law lost $50 and her husband won about $80.
“We’re not hurting anybody,” she said. “We see it as entertainment and have fun. I’ve never been in one where there’s a fight or an argument or a disagreement, anything like that. You don’t see any riffraff.”
Gamblers like Mrs. Salinas have an unlikely group to thank for the slot-machine boom: the Texas Legislature.
In 1993, lawmakers approved legislation that seemed so innocuous it was known as the “fuzzy animals” bill. It was intended to ensure that amusement games, such as those played by children at Chuck E. Cheese’s or a carnival that awarded stuffed animals, would not be considered unlawful gambling devices. The bill, signed into law by Gov. Ann W. Richards, legalized any device made for “bona fide amusement purposes” that awarded noncash prizes with a value of $5 or no more than 10 times the amount charged to play the game.
But operators of illegal gambling rooms began exploiting the law. Hundreds opened in Houston’s Harris County, until county leaders approved tough regulations that required them to close between 10 p.m. and 8 a.m., to have untinted windows and to be at least 1,500 feet from schools, churches and residential neighborhoods. In 2011 in Brownsville in South Texas, the federal Homeland Security Investigations began looking into money-laundering activity associated with eight-liner establishments. They uncovered an estimated 9,000 machines making $300 million annually in Cameron County.
“That amount of money is just a huge red flag for us at the federal level,” said Kevin W. Benson, assistant special agent in charge of Homeland Security Investigations in the Brownsville area.
Cameron County’s eight-liner industry has been largely dismantled, after the federal investigators shared their intelligence with the district attorney, Luis V. Saenz. About 40 raids have been conducted since April 2013 as part of Mr. Saenz’s Operation Bishop, including one at the American Legion in Port Isabel and others at empty houses that were turned into illegal gambling rooms with automated teller machines for customers to use.
“I’m not here to judge morally,” Mr. Saenz said. “I’m the chief law enforcement officer of the county, and it’s my job to enforce the law. We hit this place in La Feria that had been called ‘Little Vegas.’ It was like a compound where they had three different gaming rooms. They had their strobe lights, and their blinking lights, and their signs. They’re doing it out in the open, blatantly.”
Mr. Saenz’s focus on eight-liners has cost him votes, led to a death threat against him and supplied him with his own gambling room, of sorts. About 100 slot machines seized in the raids sit in a brick warehouse. Roughly 500 others were sold to a company that paid the county $100,000. Mr. Saenz said environmental regulations prohibited him from destroying confiscated eight-liners.
“I wanted to steamroll them to send a message,” he said.Continue reading the main story