Texas DFS Bill – H.B. 393

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Texas is behind the curve with respect to regulating fantasy sports. To date, 23 states have fantasy sports legislation in effect. In Texas, most major fantasy operators allow contest participation though the Texas Legislature has yet to codify the legality of fantasy sports. That could change if H.B. 393, a bill filed by Texas State Representative Joe Moody of El Paso on November 9, 2020 passes this year.

H.B. 393 seeks to legalize fantasy sports contests by amending the Texas Penal Code’s definition of “bet” to exclude prizes or awards won in a fantasy sports contest. The proposed bill defines a fantasy contest as a contest where:

  1. Participants assemble a fictional sports team composed of actual professional or amateur athletes to compete against other fictional sports teams assembled by other participants for a prize, award, or compensation;
  2. the value of any prize, award, or compensation is established in advance of the beginning of the game or contest;
  3. the outcome of the game or contest is determined by the accumulated statistical performances of the individual athletes on a participant’s fictional sports team; and
  4. the outcome of the game or contest is not based solely on the score, point spread, or performance of a single professional or amateur team or athlete.

The language is mostly consistent carve-out language from the Uniform Internet Gambling Enforcement Act of 2006, which serves as the basis for rules across many states, but there are two key additions which, taken in tandem, could have a material effect on contests currently being offered in the state.

The two critical additions are “team” and “against other participants,” as in “participants assemble a fictional sports team composed of actual professional or amateur athletes to compete against other fictional sports teams assembled by other participants.”

The reason why this is important is many popular contests are known as “single-player” or “house-based” contests where a participant selects two or more athletes and pits those athletes against an equal number selected by the operator. First of all, it’s difficult to know what will constitute a “team,” especially in consideration of single player sports like golf and tennis, but more concerning is that this language will effectively outlaw some of the post popular DFS contests currently being offered in Texas.

Here’s the enabling language from UIGEA for comparison:

  1. All prizes and awards offered to winning participants are established and made known to the participants in advance of the game or contest and their value is not determined by the number of participants or the amount of any fees paid by those participants.
  2. All winning outcomes reflect the relative knowledge and skill of the participants and are determined predominantly by accumulated statistical results of the performance of individuals (athletes in the case of sports events) in multiple real-world sporting or other events.
  3. No winning outcome is based—
    • on the score, point-spread, or any performance or performances of any single real-world team or any combination of such teams; or
    • solely on any single performance of an individual athlete in any single real-world sporting or other event.

Note that UIGEA uses “outcomes,” which allows against the house contests (whereby the participant tries to beat the operator, instead of another “participant”) that the Texas bill presumably would not allow.

I also want to point out that the bill merely exempts qualifying fantasy sports contests from prosecution under the Texas Penal Code, it does not establish a framework for regulation, and it misses out on an opportunity to earn fees for the state. Of the states that have legalized fantasy contests, 18 currently require licensing, and 5 do not.

Finally, the bill will not apply retroactively, which means offenses committed before the bill’s effective date (September 1, 2021) could ostensibly still be prosecuted, though our position is that fantasy sports contests already are legal under Texas law as contests of skill.

About the Author
Kevin Vela

Kevin is the managing partner at Vela Wood. He focuses his practice in the areas of M&A, venture financing, fund representation, and gaming law.

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