Texas Amendment Would Open Door For Commercial Casinos

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On February 8, 2021, San Antonio Democratic Senator Roland Gutierrez filed Senate Joint Resolution 36 (SJR 36 or hereafter, the “Amendment”) in an effort to amend the Texas Constitution and thus pave the way for commercial casinos in Texas. If passed, the Amendment opens the door for the Texas legislature to pass laws permitting the licensure and regulation of up to twelve Texas casinos, and Senate Bill 616 (S.B. 616), Gutierrez’s other piece of legislation, does just that.

What is Senate Joint Resolution 36 and its intended result?

Currently, Section 47 of the Texas Constitution requires that the Texas legislature “pass laws prohibiting lotteries and gift enterprises” in Texas. The Texas Constitution currently includes a short list of enumerated exceptions, but casinos do not make the list. Therefore, as it stands, the Texas legislature is prohibited from considering legislation that permits casino operations, and instead must pass laws that prohibit such activity. SJR 36 seeks to change that and effectively add a limited number of Texas casinos to the list of exceptions. If successful, the Texas legislature may pass laws authorizing the licensing and operations of twelve Texas casinos, subject to express limitations.

According to the Amendment, any law passed by the Texas legislature under the amended section must include licensing, regulatory, and enforcement provisions. Furthermore, the Amendment specifically requires county approval of proposed casino operations and allows state agencies operating state lotteries to adopt rules implementing casino operations, even in the absence of enabling legislation. The Amendment is set for vote on November 2, 2021, and if successful, will effectively amend the Texas Constitution, and authorize the consideration of S.B. 616.

What is Senate Bill 616 and its intended result?

S.B. 616, Senator Gutierrez’s other piece of legislation, is contingent on the approval of SJR 36. SJR 36 simply amends the Texas Constitution in a manner which makes it possible for the Texas legislature to consider laws authorizing a limited number of Texas casinos. S.B. 616 does just that. As noted above, without an Amendment to the Texas Constitution, the Texas legislature may only pass laws prohibiting casino operations, and thus without an amendment such as SJR 36, the Texas legislature is prohibited from considering S.B. 616. If the Amendment is passed, the Texas legislature may (and plans to) vote on S.B. 616, which as required by SJR 36, includes the minimum licensing, regulatory, and enforcement provisions.

Licensing and Regulatory Provisions

S.B. 616 appoints the Texas Lottery Commission (“TLC”) as the state agency in charge of implementing a licensing program, regulations, and enforcement provisions for casino operations in Texas. Among other things, this includes promulgating rules and procedures related to casino operator licensing, fees, reporting requirements, inspections, and related investigations.

In addition to licensing from the TLC, casino operators must also obtain county approval. This second requirement mandates that local municipalities follow the specific proposal and election procedures regarding approval of a casino in their county. Notably, if a county fails to gain a majority in two consecutive elections, there is a mandatory five-year waiting period before the matter can appear on the ballot again.

As noted, under both SJR 36 and S.B. 616, only 12 licenses are to be issued, and each license holder may only operate one casino. In addition to the casino itself, casino managers, vendors of gaming equipment or service providers, and certain gaming employees must also obtain licenses, and each individual will be required to pass a background investigation. Finally, SB 616 also sets up a special account for casino tax revenue, without stipulating a required appropriation of funds.

Enforcement Provisions

S.B. 616 also specifies certain criminal prohibitions and basis for disciplinary action. Specifically, the proposed bill imposes disciplinary actions for game manipulation, tampering, and access to minors (under 18). The offenses impose criminal, civil, or administrative liability that can result in fines, a misdemeanor offense, and potentially even the loss of licensure.

First, the proposed bill criminalizes the playing of casino games by anyone under 18 and makes knowingly allowing a minor to play casino games a Class B misdemeanor. The proposed bill also makes illegally manipulating or tampering with a casino game a third-degree felony. Additionally, under the proposed bill, the TLC can impose fines of up to $1,000 against casino operators for violations of state law or the commission’s rules or take other disciplinary steps, such as revocation of casino licenses.

Conclusion

As you can see, there are significant hurdles to opening casinos in Texas. Senator Gutierrez’s proposed legislation to amend the Texas Constitution is likely to be hotly contested this November. If the Amendment is passed, there is no guarantee that Senate Bill 616 will ultimately be the bill that allows casinos in Texas, but something similar will be passed soon.

It is important to understand that authorizing casinos does not necessarily mean that sports betting will be allowed; that is likely to come through a separate bill, HB1121. In any event, the Texas legislature and state voters are not likely to go through the trouble of amending the Constitution without a plan in place to authorize casinos. This could be historic legislation and Vela Wood will be sure to provide periodic updates.

Posted in: Sports & Gaming