87R3463 ADM-D     By: Dutton H.B. No. 1121       A BILL TO BE ENTITLED   AN ACT   relating to the regulation of sports betting; requiring an   occupational permit; authorizing a fee; imposing a tax; creating   criminal offenses; providing a civil penalty.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Subtitle A, Title 13, Occupations Code, is   amended by adding Chapter 2005 to read as follows:   CHAPTER 2005. SPORTS BETTING   SUBCHAPTER A.  GENERAL PROVISIONS          Sec. 2005.001.  DEFINITIONS. In this chapter:                (1)  "College sport" means an athletic event:                      (A)  in which at least one participant is a team   from a public or private institution of higher education,   regardless of the location of the institution; and                      (B)  that is not a Texas college sport.                (2)  "Commission" means the Texas Commission of   Licensing and Regulation.                (3)  "Department" means the Texas Department of   Licensing and Regulation.                (4)  "Executive director" means the executive director   of the department.                (5)  "Professional sport" means an athletic event   involving at least two human competitors who receive compensation,   in excess of their expenses, for participating in the event. The   term does not include greyhound racing or horse racing regulated   under Subtitle A-1 (Texas Racing Act).                (6)  "Sports betting" means placing a wager on a   professional sport or college sport competition.  The term does not   include wagering on greyhound racing or horse racing regulated   under Subtitle A-1 (Texas Racing Act).                (7)  "Sports betting platform" means an Internet   website, an application for a wireless telecommunication device, or   any other similar technology that allows sports bettors to engage   in sports betting.                (8)  "Sports bettor" means an individual physically   located in this state who participates in sports betting.                (9)  "Texas college sport" means an athletic event in   which at least one participant is a team from a Texas public or   private institution of higher education.                (10)  "Youth sport" means an athletic event:                      (A)  involving a participant who is 17 years of   age or younger; or                       (B)  in which at least one participant is a team   from a public or private elementary, middle, or secondary school,   regardless of the location of the school.   SUBCHAPTER B.  POWERS AND DUTIES          Sec. 2005.051.  SPORTS BETTING PROGRAM.  (a)  The commission   shall operate a sports betting program under the direction of the   executive director that allows applicants to apply for sports   betting operation permits to engage in sports betting operations in   this state.          (b)  The commission may establish a sports betting program   directed by the executive director that authorizes the department   to operate a sports betting platform. Any revenue received from a   sports betting platform operated by the department that exceeds the   expenses necessary to operate the platform shall be deposited to   the credit of the foundation school fund.          (c)  The executive director may:                (1)  require bond or other surety satisfactory to the   executive director from sports betting operation permit holders in   the amount provided by rules adopted under this chapter;                (2)  suspend, revoke, or refuse to renew a sports   betting operation permit issued under this chapter; and                (3)  enter into contracts for the operation of the   sports betting program established under this section and enter   into contracts related to sports betting with other states,   provided that any contract entered into by the executive director   contains a provision prohibiting assignment of the contract except   with specific approval of the executive director.          Sec. 2005.052.  RULES.  The commission shall adopt rules   necessary to protect the public health and safety, administer this   chapter, and regulate a sports betting program established under   this chapter.          Sec. 2005.053.  REPORTS.  (a)  The executive director shall   provide to the commission, the comptroller, the governor, and the   chairs of the standing committees of the senate and house of   representatives with jurisdiction over state finances and   appropriations a monthly statement of the sports betting revenues   received by the department and the expenses incurred by the   department in regulating sports betting for the preceding month.          (b)  The executive director shall submit to the governor and   the legislature an annual report that includes:                (1)  a statement of the sports betting revenues   received by the department and the expenses incurred by the   department in regulating sports betting for the preceding state   fiscal year; and                (2)  any recommendations, including statutory   amendments, of the executive director or commission related to   regulating sports betting.          (c)  The executive director shall immediately report to the   governor and the legislature any matter that requires an immediate   change in state law to prevent abuse and circumvention of this   chapter or rules adopted under this chapter or to rectify   undesirable conditions in connection with the administration or   operation of a sports betting program.   SUBCHAPTER C. SPORTS BETTING REGULATION          Sec. 2005.101.  SPORTS BETTING OPERATION PERMIT REQUIRED.  A   person may not conduct a sports betting operation in this state   unless the person holds a sports betting operation permit issued   under this chapter.          Sec. 2005.102.  APPLICATION AND FEE FOR SPORTS BETTING   OPERATION PERMIT; OFFENSE. (a)  An applicant for a sports betting   operation permit shall submit to the department:                (1)  an application on a form prescribed by the   executive director, containing the information prescribed in   Subsection (b); and                (2)  a fee of $250,000.          (b)  An application for a sports betting operation permit   must include the following information:                (1)  the applicant's experience in sports betting;                (2)  the applicant's experience in wagering activities   in this state and other jurisdictions, including the applicant's   history and reputation of operational integrity and regulatory   compliance;                (3)  the applicant's proposed internal controls,   including controls to ensure that an individual who is excluded   from participating in sports betting does not participate in sports   betting;                (4)  the applicant's history of preventing compulsive   gambling, including employee training programs; and                (5)  any other information the executive director   considers necessary.          (c)  The department shall conduct a background investigation   on each applicant for a sports betting operation permit.  The   background investigation must include a credit history check, a tax   record check, and a criminal history record check.          (d)  The executive director may not issue permits for more   than five sports betting operations to operate at any time.  If more   applicants submit applications for permits than the permits   available, the executive director shall issue the number of   available permits to the applicants the executive director   determines will best:                (1)  perform the duties of a sports betting operation   permit holder; and                (2)  maximize revenue to this state.          (e)  A sports betting operation permit that is revoked or   expired is not counted for purposes of the maximum number of permits   authorized by Subsection (d).          (f)  The executive director shall approve an application and   grant a sports betting operation permit not later than the 60th day   after the date the application is received unless the executive   director:                (1)  is prohibited from issuing additional permits   under Subsection (d); or                (2)  finds an applicable ground for denial under   Section 2005.103.           (g)  The executive director's decision under Subsection (f)   is final unless appealed in accordance with this chapter.          Sec. 2005.103.  DENIAL OF SPORTS BETTING OPERATION PERMIT   ISSUANCE OR RENEWAL.  The executive director may deny issuance or   renewal of a sports betting operation permit if:                (1)  the executive director reasonably believes:                      (A)  the applicant is unable to satisfy the duties   of a permit holder imposed under Section 2005.107;                      (B)  the applicant or any officer or director of   the applicant lacks good character, honesty, or integrity; or                      (C)  the applicant's, officer's, or director's   prior activities, criminal history, reputation, or associations   are likely to:                            (i)  pose a threat to the public interest;                            (ii)  impede the regulation of sports   betting; or                             (iii)  promote unfair or illegal activities   in the conduct of sports betting;                (2)  the applicant, officer, or director knowingly   makes a false statement of material fact or deliberately fails to   disclose information requested by the executive director;                (3)  the applicant, officer, or director knowingly   fails to comply with this chapter, rules adopted under this   chapter, or any requirements of the executive director;                (4)  the applicant, officer, or director was convicted   of a felony, a crime of moral turpitude, or any criminal offense   involving dishonesty or breach of trust in the 10 years preceding   the date the permit application is submitted;                (5)  the applicant's license, registration, or permit   to conduct a sports betting operation issued by any other   jurisdiction has been suspended or revoked;                (6)  the applicant defaults in payment of any   obligation or debt due to this state; or                (7)  the applicant's application is incomplete.          Sec. 2005.104.  BOND REQUIRED.  Before issuance of a sports   betting operation permit, each permit holder must execute a bond   cosigned by a surety company authorized to conduct business in this   state in the amount required by commission rule.          Sec. 2005.105.  RENEWAL OF SPORTS BETTING OPERATION PERMIT.   (a)  A sports betting operation permit issued under this subchapter   expires on the third anniversary of the date the permit is issued.          (b)  Not later than the 60th day before the date a sports   betting operation permit expires, a permit holder wishing to renew   the permit shall submit to the department:                (1)  a renewal application on a form prescribed by the   executive director; and                (2)  a renewal fee of $200,000.          (c)  The executive director may deny a sports betting   operation permit renewal if the executive director finds a ground   for denial under Section 2005.103.          (d)  The executive director's action is final unless   appealed in accordance with this chapter.          Sec. 2005.106.  CRIMINAL PENALTY.  (a)  Any person who   knowingly falsifies, conceals, or misrepresents a material fact or   knowingly makes a false, fictitious, or fraudulent statement or   representation in any application for a sports betting operation   permit under this subchapter commits an offense.          (b)  An offense under Subsection (a) is a Class A   misdemeanor.          Sec. 2005.107.  DUTIES OF SPORTS BETTING OPERATION PERMIT   HOLDERS. (a)  A sports betting operation permit holder shall ensure   that the permit holder's sports betting operation takes reasonable   measures to:                (1)  allow only individuals physically located in this   state to place bets through the permit holder's sports betting   platform;                (2)  protect the confidential information of sports   bettors using the permit holder's sports betting platform;                (3)  prevent betting that is prohibited under this   chapter or other state law;                (4)  allow an individual to restrict the individual's   access to placing a bet with the permit holder's sports betting   operation, including sharing with the department on the   individual's request the restriction for the sole purpose of the   department disseminating the request to other permit holders;                (5)  establish procedures to detect suspicious or   illegal betting activity, including measures to immediately report   the activity to the department; and                (6)  provide for the appropriate withholding of the   applicable amount of state tax as required by Section 2005.108 and   any federal income tax required under other laws or by rule for   persons who receive income from sports betting.          (b)  A sports betting operation permit holder shall maintain   records on:                (1)  all sports betting placed with the permit holder,   including records of:                      (A)  a sports bettor's personal information;                      (B)  the amount and type of bet;                      (C)  the time and location of the bet; and                       (D)  the outcome of the bet; and                (2)  suspicious or illegal sports betting activity.          (c)  A sports betting operation permit holder shall disclose   the records described in Subsection (b) to the department on   request and shall maintain the records until at least the third   anniversary of the date the related sports event occurs.          (d)  A sports betting operation permit holder shall ensure   that advertisements for its sports betting operations:                (1)  disclose the identity of the permit holder;                (2)  provide information about or links to resources   related to gambling addiction;                (3)  are not misleading to a reasonable person; and                (4)  do not target persons under the age of 21.          (e)  A sports betting operation permit holder may not   sublicense, convey, concede, or otherwise transfer a permit to a   third party.          (f)  A sports betting operation permit holder is prohibited   from holding itself out to the public as a sports betting operation   under more than two brands.           (g)  A sports betting operation permit holder shall   conspicuously display the permit holder's identity to sports   bettors on any sports betting platform operated by the permit   holder.          Sec. 2005.108.  TAX; USE OF TAX REVENUE. (a)  A tax of 6.25   percent is imposed on each bet placed by a sports bettor under this   chapter. The tax is to be collected by the sports betting operation   permit holder at the time the bet is placed.          (b)  The tax collected under this section is payable monthly   to the department, and the sports betting operation permit holder   shall remit the collected taxes on or before the 20th day of the   next calendar month.          (c)  If the sports betting operation permit holder's   accounting necessitates corrections to a previously remitted tax,   the permit holder shall document the corrections when the following   month's taxes are paid.          (d)  The department shall deposit tax revenue collected   under this section to the credit of the foundation school fund.          Sec. 2005.109.  LIQUIDITY POOLS. (a)  The commission may   adopt rules authorizing sports betting operation permit holders to   offset loss and manage risk, directly or with a third party approved   by the department, through the use of a liquidity pool in this state   or another jurisdiction provided that the permit holder, or an   affiliate of the permit holder, is licensed or otherwise authorized   by that jurisdiction to operate a sports betting business.          (b)  A sports betting operation permit holder's use of a   liquidity pool does not eliminate the permit holder's duty to   ensure that sufficient funds are available to pay bettors.          Sec. 2005.110.  INTERMEDIATE ROUTING OF ELECTRONIC DATA.   (a)  Sports betting offered to a sports bettor in this state must be   initiated and received within this state unless otherwise   authorized by federal law.          (b)  The intermediate routing of electronic data relating to   sports betting authorized under this chapter does not determine the   location where a bet is initiated and received for purposes of   determining compliance with this chapter.   SUBCHAPTER D. DISCIPLINARY ACTIONS AND PENALTIES          Sec. 2005.151.  CIVIL PENALTIES; SUSPENSION AND REVOCATION   OF SPORTS BETTING OPERATION PERMIT. (a)  If the executive director   determines a sports betting operation permit holder has violated   this chapter or rules adopted under this chapter, the executive   director in accordance with Chapter 51 may:                (1)  suspend or revoke the permit holder's permit; and                (2)  impose a monetary penalty not to exceed $1,000 for   each violation of this chapter.          (b)  An action taken by the executive director under this   section is final unless appealed in accordance with Sec. 2005.152.          Sec. 2005.152.  APPEAL. (a)  The commission shall hear and   decide an appeal of any denial of a sports betting operation permit   by the executive director or suspension or revocation of a permit   under this chapter.          (b)  The action of the commission in granting or denying a   sports betting operation permit or suspending or revoking a permit   under this chapter may be referred to the State Office of   Administrative Hearings for a contested case hearing.          Sec. 2005.153.  PROHIBITED BETTING; OFFENSES. (a)  A person   commits an offense if the person places or accepts a bet on Texas   college sports or youth sports.          (b)  A person commits an offense if the person knowingly   accepts or redeems or offers to accept or redeem a sports bet made   by or on behalf of a person under 21 years of age.          (c)  An offense under this section is a Class A misdemeanor.          (d)  If conduct that constitutes an offense under this   section also constitutes an offense under another law, the actor   may be prosecuted under this section, the other law, or both.          Sec. 2005.154.  PERSONS PROHIBITED FROM BETTING; OFFENSE.   (a)  A person commits an offense if the person places a sports bet   and the person is:                (1)  a member, officer, or employee of the commission   or the department;                (2)  a sports betting operation permit holder or an   officer, director, or employee of a permit holder;                (3)  an officer, director, or employee of any entity   working directly on a contract relating to sports betting with the   department; or                (4)  a competitor, coach, trainer, employee, or owner   of a team in a sports event, or any referee for a sports event, and   the actor places the sports bet on that event.          (b)  An offense under this section is a Class A misdemeanor.          (c)  If conduct that constitutes an offense under this   section also constitutes an offense under another law, the actor   may be prosecuted under this section, the other law, or both.          Sec. 2005.155.  OPERATION AND ADVERTISING OF UNPERMITTED   FACILITY PROHIBITED; CIVIL PENALTY. (a)  A person may not make the   person's premises available for placing wagers on sports betting   using the Internet or advertise that the person's premises may be   used for that purpose unless the person holds a sports betting   operation permit issued under this chapter.          (b)  The executive director may impose a monetary penalty for   each violation of this section. For a person determined to have   made the person's premises available for placing wagers on sports   betting using the Internet, the penalty may not exceed $1,000 per   day per individual who places a bet. For a person determined to have   advertised that the person's premises may be used for that purpose,   the penalty may not exceed $10,000 per violation.          SECTION 2.  Section 47.02(c), Penal Code, is amended to read   as follows:          (c)  It is a defense to prosecution under this section that   the actor reasonably believed that the conduct:                (1)  was permitted under Chapter 2001, Occupations   Code;                (2)  was permitted under Chapter 2002, Occupations   Code;                (3)  was permitted under Chapter 2004, Occupations   Code;                (4)  was permitted under Chapter 2005, Occupations   Code;                (5)  consisted entirely of participation in the state   lottery authorized by the State Lottery Act (Chapter 466,   Government Code);                (6) [(5)]  was permitted under Subtitle A-1, Title 13,   Occupations Code (Texas Racing Act); or                (7) [(6)]  consisted entirely of participation in a   drawing for the opportunity to participate in a hunting, fishing,   or other recreational event conducted by the Parks and Wildlife   Department.          SECTION 3.  Section 47.09(a), Penal Code, is amended to read   as follows:          (a)  It is a defense to prosecution under this chapter that   the conduct:                (1)  was authorized under:                      (A)  Chapter 2001, Occupations Code;                      (B)  Chapter 2002, Occupations Code;                      (C)  Chapter 2004, Occupations Code;                      (D)  Chapter 2005, Occupations Code;                      (E)  Subtitle A-1, Title 13, Occupations Code   (Texas Racing Act); or                      (F) [(E)]  Chapter 280, Finance Code;                (2)  consisted entirely of participation in the state   lottery authorized by Chapter 466, Government Code; or                (3)  was a necessary incident to the operation of the   state lottery and was directly or indirectly authorized by:                      (A)  Chapter 466, Government Code;                      (B)  the lottery division of the Texas Lottery   Commission;                      (C)  the Texas Lottery Commission; or                      (D)  the director of the lottery division of the   Texas Lottery Commission.          SECTION 4.  This Act takes effect January 1, 2022, but only   if the constitutional amendment authorizing the legislature to   legalize wagering on professional and collegiate sporting events in   this state is approved by the voters.  If that amendment is not   approved by the voters, this Act has no effect.