Is Texas Willing to Roll the Dice on Gambling Reform?

Feb 8

Of the 50 states, Texas is, and has remained, a staunch opponent to gambling legalization. More than 30 states (and the District of Columbia) have legalized sports betting yet, time and again, any efforts to enact change in Texas is shot down before voters are given the opportunity to voice their own opinions. A new proposed change to Texas’ gambling restrictions is up for discussion in the most recent legislative session, where lawmakers are showing their hands on why gambling will be beneficial for Texans. The question now becomes: will Texas hold’ em, or fold ‘em?

“Fewer than 10% of bills make it through the Texas legislative gauntlet, and Texas has always held strong on its no-gambling policy, so SJR 17 will need to garner significant support to survive long enough to become law. ”

Texas Senate Joint Resolution 17 (“SJR 17”), submitted by Texas Senator Carol Alvarado on November 14, 2022, proposes a constitutional amendment “to foster economic development and job growth and to provide tax relief and funding for education and public safety by creating the Texas Gaming Commission, authorizing and regulating casino gaming at a limited number of destination resorts and facilities licensed by the commission, authorizing sports wagering, requiring occupational licenses to conduct casino gaming, and requiring the imposition of a tax.” Specifically, the resolution proposes the following:

A tax rate of 10% of gross gaming revenue from “table games” (blackjack, poker, etc.) and 25% rate on slot machine revenues—sports betting tax rates are still to be determined (although the resolution does not even mention mobile wagering via online sports betting sites).
The newly-enacted Texas Gaming Commission would be empowered to issue betting licenses for up to four “destination resorts” in metropolitan areas with populations of two million or more. One major player here is Mark Cuban, who plans to join forces with the Las Vegas Sands Corporation to build a new Vegas-style casino and resort complex in the heart of Dallas.
Some horse tracks would be eligible for casino gaming licenses.
Texas tribal casinos would need to enter into revenue-sharing agreements with the state.

The resolution was brought during the current Texas legislative session, which began on January 10, 2023. As with other joint resolutions, it requires two-thirds approval by the combined House and Senate legislatures before it can be filed with the secretary of state, then introduced for statewide vote in the November 2023 general election.

Fewer than 10% of bills make it through the Texas legislative gauntlet, and Texas has always held strong on its no-gambling policy, so SJR 17 will need to garner significant support to survive long enough to become law. A major proponent of SJR 17 is the Sports Betting Alliance (“SBA”)—founded in 2021 with the objective of promoting legal mobile and retail sports betting in Texas. The group is led by major U.S. sportsbooks DraftKings, FanDuel, BetMGM, Barstool Sportsbook, and Fanatics Sportsbook, and comprises almost every major professional sports franchise in Texas (the Texas Rangers, Dallas Cowboys, Dallas Mavericks, and Dallas Stars, to name a few). The SBA advocates that the Dallas—Fort Worth metropolitan area would be a prime location for a casino resort if gambling was legalized due to its strong convention and tourism industries and its proximity to major airport hubs.

The SBA’s position, however, is not shared by all. Lieutenant Governor and presiding officer of the Texas State Senate, Dan Patrick, is a notorious opponent of sports betting legalization, so his re-election in March 2022 could be a significant obstacle for Texas’ sports betting aspirations. On the other hand, Dade Phelan, Texas’ Speaker of the House of Representatives, is open to bringing resort-style casinos to Texas. He’s quoted as saying he doesn’t want “to walk into every convenience store and see 15 slot machines,” but rather he is open to high quality “destination-style casinos” that create jobs and that improve the overall community lifestyle. The presiding officers of the Texas House and Senate thus have differing views on the subject, so it remains to be seen how the legislative vote will play out. Even Governor Greg Abbott, once a firm opponent to gambling legalization in Texas, is now open to the idea if it creates a professional entertainment option for Texans without negatively impacting crime or poverty. This begs the question: what, then, are the pros and cons of SJR 17 being signed into law?

The resolution itself, along with proponents and lobbyists like the SBA, claim that legalization of gambling in Texas could generate massive tax sums from gaming and sports betting revenue. After all, the illegal sports betting market in Texas allegedly costs the state many millions of dollars in lost potential annual tax revenues—with projections estimating that illegal sports betting in Texas generated ~$5.0 billion in 2021 and ~$8.7 billion in 2022. People don’t appear to be slowing down on the sports betting front, so the state may as well legalize it to generate tax revenue. In addition, legalization means Texans won’t have to travel long distances to cross state lines to gamble legally, which also means more of Texans’ money will be spent right here in Texas. Further, resort-style gambling destinations increase job growth, spur tourist travel, and promote the area as more of an entertainment destination. On the other hand, gambling carries with it the stigma of being a tool to prey on populations who struggle financially. Gambling can promote an increase in crime, and it always carries the risk of increasing gambling-related addiction. These unfortunate byproducts of gambling legalization are unavoidable, so state legislatures will need to carefully weigh each side of the debate before taking the legalization plunge. In the meantime, although Texas appears to be closer than ever to passing legislation that legalizes and regulates gambling, SJR 17 has a steep hill to climb before it can become law.