Texas Online Sports Betting: Is it Legal?

TexasIn contrast to other states that have either legalized online gaming or taken significant steps towards doing so, Texas has made no progress whatsoever towards legalizing any type of gaming in the state. There are little to no prospects at the current time for Texas to legalize online gaming. The gambling landscape is Texas is sparse, at least from a legal perspective, due to cultural factors inherent in Texas.

Existing Gambling in Texas

While other neighboring states are starting to allow gaming outlets, Texas only has three casinos in the state. Commercial casinos are by law not permitted to operate in Texas. Most of the gaming in Texas is centered on the Texas State Lottery and limited horse racing venues. The three casinos in the state are Native American casinos. Two of these casinos have been the subject of protracted litigation in which the state successfully closed the casinos. These casinos restarted operations on their own after the National Indian Gaming Commission issued a legal opinion stating that these casinos were not illegal The matter is back in court where the state has again attempted to shutter the casinos. Texas has undertaken numerous efforts over the years to crack down on what it views to be illegal gambling. In addition, various types of poker rooms have been established where the operator charges players “rental fees” so as not to run afoul of restrictions against receiving money from a pot as an organizer of a game of chance.

The act of gambling is not per se illegal in itself in Texas. Residents of the state wager on DFS and through offshore casinos, and no enforcement actions have been taken against them. There is nothing that prohibits these activities. Offering gambling as an operator, however, is illegal in Texas and the restrictions are extensive. However, these restrictions are not necessarily clear and they are inconsistently enforced. There is enough gray area in Texas gambling laws that creates some uncertainty for operators to devise new types of gaming that may not necessary be illegal.

Currently, the black market for gambling in Texas is strong. In addition to the poker rooms, there are slots in Texas that operate either in spite of, or with the tacit endorsement of law enforcement. One loophole that is exploited is that some slot machines pay non-cash prizes, since the illegality is the payment of cash prizes. This loophole originated from the fact that legislators wanted to ensure that amusement machines that awarded prizes would not be considered illegal gambling.

Other slot machines simply operate behind closed doors. Some counties receive tax revenue from licensing slot machines that may or not be violating the law. The case of slots evidences both the vague nature of Texas laws and the amount of gambling that occurs notwithstanding the prohibitions in the law.

Prospects for Gaming Expansion

In addition, there are no efforts underway in Texas that would legalize sports betting. Numerous pari mutual venues have expressed an interest in accepting sports wagers if they were to be legalized. Numerous gambling legalization bills have been introduced in the past, but they have never received a vote in the Texas Legislature. Instead, they have been sent to committee where the bills have died. Even in the event that the bills cleared the legislature, they would likely face a veto from the Texas Governor who maintains his opposition to gambling.

Even legislation that would have legalized and regulated daily fantasy sports in Texas never made it out committee and languished after it was introduced. DraftKings & FanDuel do not operate their daily fantasy product in Texas. At this point, Texans are left to hope that demographic changes in the state could ultimately change the political calculus in a way that would permit online and expanded gaming in the state because the current leadership is intractably opposed. Other neighboring states such as Oklahoma, New Mexico and Louisiana have expanded gaming regardless of the political bent of those that control the levers of power in the states.

Notwithstanding studies that show that expanded gaming can have a $1.7 billion impact on the Texas economy, political forces in the state vehemently oppose gaming. The black market in the state is already estimated at close to $2 billion. The bulk of the opposition to gambling is based on moral and religious objections to wagering. In addition to opposition based on moral grounds, some Texas opponents of gambling claim that expended wagering would lead to greater spending on social programs and regulation. Interestingly enough, the Texas Attorney General signed a legal brief supporting New Jersey in the case of Murphy v. NCAA, but his support should not be interpreted as an endorsement of gambling. Instead, he viewed the federal ban on sports wagering as an encroachment on state’s rights.

It is unlikely that legal gaming expansion will come to Texas anytime soon, and little can change that reality even though the gambling is already occurring. Perhaps if the state receives evidence that Texas residents are travelling outside of the state to gamble, a movement would begin to expand gaming in Texas to keep revenues within the state. That, however, is doubtful to occur. As is, Texas is losing potential revenues as its residents are betting offshore and illegally within the state, and that revenue could be taxed. Control of the state government would need to change hands at this point in order for gambling to be expanded in any form in the state. The best possible outcome for gambling proponents at this point is that voters are able to decide the question of gaming expansion in a referendum.

Sam Shefrin is the founder of Lineups.com, Inc. Before Lineups, he started Daily Fantasy Cafe, Inc. in 2014. Armed with a passion for sports and every Atlanta team, his journey continues with the goal of making Lineups a premier sports analytics destination. He has been quoted on Forbes.com for industry insight and his websites featured on NBATV, Yahoo! Sports, Fantasy Pros, Bleacher Report and SB Nation.