Texas Issues a Formal Online Sports Wagering Bill for 2021

• A unique plan by legislators to license Texas professional sports teams being introduced
• There are a few significant barriers toward passage not common in other US states
• Getting talks started in Texas is positive with necessary funding due to COVID-19 vital

While prominent states including Michigan and Virginia got underway last week with legalized online sports wagering, it appears that Texas may now be willing to join the crowd.

The state is feeling the pressure of a serious state funding deficit amid the continuing effects of COVID-19. The governor’s office and other legislators within Texas have now started putting out feelers about adopting legal sports betting. Most important, writing a first formal bill for presentation.

Rep. Harold Dutton Jr. (D-Houston) has introduced sports betting law in the Texas State House that only applies to mobile devices. The proposal limits the number of permits granted to five while providing a favorable tax rate of 6.25 percent.

What makes House Bill 1121 (HB 1121) different from others is that it is reportedly endorsed by some of Texas’ most famous professional sports teams. The plan is sponsored by Jerry Jones, owner of the Dallas Cowboys, along with Mark Cuban and Tilman Fertitta, owners of the NBA Dallas Mavericks and Houston Rockets. It would allow for pro-sports franchises to become licensees and permit for pari-mutuel kiosk facilities within their buildings in Texas.

All three team owners have some links tied to gambling activity. Fertitta owns Golden Nugget, with Jones having a stake in DraftKings Sportsbook as of May 2020. Cuban is an investor in Esports betting platform Unikrn.

This legislation would enable racetracks, sports teams, among other entities to operate online sports betting through single skin. Some estimates have 16 skins available in the state. Other predictions assume that 14 to 20 skins could be made available. After obtaining a skin, a team or a racetrack could work with one sportsbook operator such as a DraftKings, FanDuel, or PointsBet.

The office of Texas Governor Greg Abbott also has reportedly been reaching out to other states including New Jersey where sports betting has been legal for some time on how to adopt the best plan.

Bill Pascrell III, a lobbyist with Princeton Public Affairs Group commented on the issue:

Something is going to happen in Texas. It’s complicated because there’s no gaming culture and nothing definitive yet. But the governor is interested, and the legislature is interested.

Taxes and Take-out are Remarkably Low

If this bill were passed and signed by Governor Abbott, Texas would include one of the lowest sports betting taxes in the country. At 6.25 percent, the state would be half a percent below Iowa and Nevada and 225 basis points below New Jersey, currently the largest market for sports betting in the US. The tax system proposed by Dutton is also extensively lower than the 34 percent and 51 percent levels in place respectively in Pennsylvania and Rhode Island.

House Bill 1121 calls for prohibiting wagering on all Texas college athletics. A major revenue opportunity considering the passion for college football within the state.

A Few Significant Barriers to Entry

With Texas being the US second-largest in population and 13th wealthiest based on GDP per capita, no one will dispute the opportunity for potential sports wagering success. However, there are several barriers to cross that other states have not faced in their road toward the entry.

First, any effort could be opposed by the Texas State House. Before his recent death, Sands Corporation owner Sheldon Adelson spent $4.5 million aiding Republicans to maintain control in the state. He then hired high-profile lobbyists helping to advance his interests opposing online gambling. Adelson reportedly had plans for a new casino in Texas. Had he not passed away; he would have viciously opposed actions as outlined in Bill 1121.

Secondly, the suggestion of a professional sports team becoming a license holder would need to be worked upon. A concept that five years ago would be impossible before the US Supreme Court’s reversal of PASPA (the Professional and Amateur Sports Protection Act of 1992). Stringently against PASPA, the leagues themselves hired attorneys and lobbyists to fight against this type of action from happening.

With last week’s news of Virginia beginning online wagering and offering one initial license to FanDuel BECAUSE of their relationship to the Washington Football Team, anything may be possible now.

The “bottom line” here in Texas, like other US states continue to suffer serious budget gaps due to COVID-19 and are looking for adaptable solutions to help. With others quickly coming on board, we are likely to see the Lone Star State advance in talks discussing legalized sports wagering within the upcoming months.