All The Reasons Texas Won’t Legalize In 2023

Much has been made over the last few months about the possibility of Texas lawmakers legalizing sports betting and casino gaming, but many signs point to this not being the year the nation’s second-biggest state is ready to do so.

So far, this session has been one in which lawmakers get educated and begin to crystalize a firm idea of what they want legal gambling to look like. During a hearing last month, lawmakers discussed tax rate, fees, retail vs. digital, and responsible and problem gambling plans.

The tenor of the hearing was such that lawmakers were still in learning mode, while also clearly sharing that they believe that as a massive state, Texas should command top dollar from wagering and casino operators. There also was no sense of urgency.

“It won’t pass this session because there’s not a budget deficit,” Brant Martin, a partner at Wick Phillips, said during a panel on the future of Oklahoma and Texas gaming at the annual Indian Gaming Association conference in San Diego. “That tells you a lot about politics.”

Consultant Brendan Bussmann, principal at B Global, a Nevada-based gaming consulting firm, put a finer point on prospects for gambling proposals that have been offered: “Looking at both bills, all roads continue to lead through the Senate. And until we hear otherwise, I think we’re going to be hard pressed to get this done and across the finish line this year.”

Sports betting, casino, or both?

The Texas Legislature meets only in odd-numbered years, meaning the process there seems more protracted than it actually is. This month’s hearing was only the second on gambling expansion since the Professional and Amateur Sports Protection Act was overturned in 2018, making wagering a states’ rights issue.

Typically, it takes multiple sessions for lawmakers to become familiar enough with the issue and reach a consensus, so 2023 likely won’t be the year. But after this session closes in May, lawmakers will have 18 months to meet, learn, discuss, and craft legislation that has all of the ingredients to pass.

Stakeholders consider moot the two key bills put up for discussion this year, saying that neither has much of a chance to pass.

Texas lawmakers are faced with a bigger gambling decision than in many states that have already addressed it — whether to add brick-and-mortar casinos to the state’s landscape. Stakeholders say that a standalone wagering bill, HB 1942, is dead for this session, while HB 2843, which would create seven “destination casino resorts” in addition to sports wagering, has piqued the interest of lawmakers.

“I think, eventually, it’s coming,” said Rory Dilweg, a partner at Ocotillo Law & Policy Partners, at the IGA convention. “When or what the scope is, I don’t know. The destination resorts bill has gotten a lot of attention, but it won’t pass this session. When it does, it will be some iteration of that.”

Texas doesn’t need casinos. And could online sports betting be just as bad?-FWST:https://t.co/argpvbXqCT

— TxLRLClips (@TxLRLClips) March 27, 2023

With regard to legislation allowing only sports betting, as soon as bill sponsor Jeff Leach was questioned about the tax rate — 10% in his bill — and the $500,000 application fee, he backed down, saying both were “negotiable.” Given the size of the market, Texas could command higher fees and taxes, but the 10% tax rate is the sweet spot for operators, who say anything higher makes it tough to turn a profit. Of the 26 states that have legalized digital wagering, 13 have tax rates of 10% or less.

“The first thing I would say is that sports betting appears to have a long way to go when the primary sponsor in the House says that the license fees and tax rates are still open for discussion,” Bussmann said. “That’s not a policy champion, that’s a front man.

“The only way that sports betting gets done is with a clear and concise message on why low tax and license fees matter, the consumer protections in place, and the ability to operate in a fair market.”

Still not enough Senate support

Lt. Gov. Dan Patrick, who presides over the Senate, said on a talk show last month that senators as yet do not have the appetite for either legal sports wagering or casinos. He told the host that there are no votes in the Senate for adding casinos, and that no bill has been filed.

In Texas, a constitutional amendment is needed for an expansion of gambling. To get the issue onto the ballot for consideration by the state’s voters, a two-thirds majority is needed, which is a higher bar than in some states. In the 31-member Senate, that would require 21 votes. The Senate has 12 Democrats and 19 Republicans.

“All the Democrats in the House and Senate will [vote for it] … so you only need nine Republicans,” Patrick said. “I’m not letting the Democrats run the Senate.

“People didn’t elect me to let the Democrats decide what we do. So, we would need 15-16 votes out of our 19 for me to even think of it.”

Texas doesn’t need the money

With all that in mind, here are reasons Texas lawmakers won’t legalize in 2023:

• The state has too much money. Texas is one of a handful of states that has a budget surplus, so lawmakers lack a compelling reason to find new cash flow for the state.
• Texas is a conservative stronghold. Until this year, Republican Gov. Greg Abbot hasn’t even entertained the idea of signing off on legal wagering. Prior to the November elections, after opponent Beto O’Rourke announced his support of legal wagering, Abbot cracked the door a teeny, tiny bit, but Patrick controls the Senate and hasn’t marshaled any support.
• It’s a two-step process. As seen in other states, a ballot referendum is no sure thing. California’s commercial-led initiative went down in flames last November, but even in states where the legislature sends a referendum to the ballot that is approved, votes have often been close. That said, some current polling suggests Texans would support legal gambling and/or sports betting.

So help me God @GregAbbott_TX @texasgov if that hell-hole known as Kentucky get sports betting before Texas I am going to lose my ever loving mind. https://t.co/Iq5NzGWf8m

— Austin Sanders (@AustinSInTexas) March 31, 2023

• Religious groups aren’t hearing it. It’s often said that the best time to get brunch or go to the mall or tee off in Texas is a Sunday morning, when seemingly the vast majority of state residents are in church. Those residents are represented in Austin by a bevy of religious coalitions, every one of which is lobbying loudly and consistently against legal wagering and casino gambling.
• Tribal issues are cropping up. Texas has three Indian tribes, none want to be shut out of the discussion, and all made a case to be included at a hearing in mid-March. In particular, the Kickapooo Tribe, whose reservation is on the Mexico border and is home to a casino, has asked for land in metro San Antonio on which to build another casino should gambling be legalized. The tribes are currently compacted for Class II gaming, but should wagering or casino become legal, they would need to recompact for Class III gaming, adding another layer to the legalization process.