Edition 39: What’s going on with Texas?

A state known for limited government has no gambling!

Apr 04, 2022

We hope you are all excited for the culmination of college basketball tonight. It’s hard to believe after all these years this is the first time we got to see UNC and Duke play in the tournament. It’s even harder to believe the game actually lived up to the hype. This week’s newsletter is inspired by one of my friends who’s moving to Texas after graduation asking why there is no legal gambling yet. We decided to dive in.

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Let’s dive in.

Background

We’re taking a bit more of a serious policy approach this week, looking at what is going on in Texas. Texas is considered to be a bastion of freedom, a place where Californians go to escape the throes of big government. Of course, whether or not that is true isn’t something we’re going to discuss in this newsletter. Point is, there is a wide conception of Texas as a place with libertarian leanings. Generally, libertarian leanings mean that the government is more permissive of individual freedoms with a lower emphasis on government oversight. As a result, if one had to guess what state would be on the forefront of legalizing gaming 15 years ago, Texas would not have been a terrible guess. They aren’t big fans of federal regulation (see ERCOT). They love sports, hosting an incredible number of professional teams across three different cities (Houston, Dallas, San Antonio), with Austin also having an F1 race and an MLS team. Texas is also a massive market. It is the second largest state in the U.S. by population and by GDP, or the total economic production in the state.

Of course, the counter argument to all the libertarianism in Texas is that there is still a strong Christian mores in Texas that discourages things that are seen as flouting conservative values. For example, marijuana is still illegal in Texas for recreational consumption.

Into the Roots of how Gambling is legalized

The modern gambling era in the early 90s, with the passage of the Professional and Amatuer Sports Protection Act (PAPSA), which banned sports gambling in most jurisdictions in the United States. The places where sports betting was permitted? They were over the moon. They had a built in control of the market that could bring in tourist dollars. On the other side, states where gambling is not allowed weren’t necessarily thrilled. State rejection really began in New Jersey in 2009 when state senator Raymond Lesniak filed suit against the Constitutionality of PAPSA in District Court. I’ll save the constitutionality arguments for another time and place, but the basic crux of the argument is that the ability to regulate sports gambling ought to be reserved to the domain of states. Long story short, it took efforts by both Governor Chirs Christie and Governor Phil Murphy to eventually prevail when the Supreme Court finally decided the case in 2018. Professional sports leagues came out with strength against the New Jerseyan effort to get legalized gambling. Eventually though, across two governors and basically my whole K-12 period of education (I graduated from high school in 2018), New Jersey was finally ready to take its first bet in June 2018 when Governor Murphy took a $20 wager on the Devils to win the Stanley cup (as a proud Devils fan, that money was as good as burned).

Fast forward a few years, and New Jersey led the charge that a lot of states followed. Questions were answered about payment options, the best way to execute mobile gaming, how geolocation was going to work and all of the other fun logistical challenges that faced operators as they got moving. New Jersey’s launch was a resounding success and inspired other states to move forward, with legalized gambling spreading across the country like wildfire. There isn’t a particular Red/Blue/Purple state divide. States from Wyoming to Illinois have taken legal bets. Though there is a bit more of a regional divide (which would be fun to explore in another piece), it’s not necessarily political. If we had to posit a quick guess on why there is more of a regional divide, it’s that legislators got sick of people just jumping across the border to place their bets and cutting into what state legislatures saw as what should have been theirs.

To Texas

So now we move more specifically into Texas. First, Texas has far less of the pressure from regional states to feel the pinch of losing dollars. Even though no one may ever say it outloud, the analyses that showed how many bets were being placed by New Yorkers inside of New Jersey had to have hurt NY lawmakers and provided a little bit of an extra push. By contrast, Texas’ large cities are deep inside the state, and two of its neighbors (New Mexico and Oklahoma) still have yet to legalize sports betting.

Now, let’s get into the doozy that likely explains why sports gambling hasn’t been legalized in Texas yet: The Texas State Constitution. The Texas Constitution is unlike the United States Constitution in that it is well over 200 pages. When we zoom in, we see that Article III prohibits “lotteries and gift enterprises” with a few exceptions for stuff like charitable raffles and bingo. Of course, there are some relevant federal laws that still allow for Native Americans to operate casinos, but sports betting is done at a state level. Attorneys’ opinions generally indicate that legalizing sports betting is mutually exclusive with this provision in the state Constitution.

Coming back to the modern day, this is a pretty clear obstacle to legalizing gambling. The natural next question is what does the process for amending the Texas State Constitution look like? Again, we’re looking at a relatively tall, yet not impossible task here. The Texas State Constitution is different from the United States Constitution in that it has been amended 515 times, including eight last year. The process for amending the Constitution starts with a joint resolution across both of Texas’s legislative chambers where a ⅔ majority of support is required. Assuming this happens, the text of the amendment specifies an election date where citizens then vote on the proposed amendment to the Constitution, which requires a simple majority of support from the population. We’re leaving out some details here that are not super pressing, such as the legalese important for wording the ballot question and adequate time to spread word of the amendment in the public square. The amendment election can be held at any time provided that sufficient notice is given to allow for the administration of the election.

So what’s happened in Texas? There were two major pushes in 2021. First was HB2070 and the second was a Joint Resolution from both the state senate and house with bi-partisian support. Both wound up dead in the water for the 2021 session, but there were indications of residual support in the state government. Texas Governor Greg Abbot l has indirectly indicated that he would be open to the possibility of supporting sports betting. Unfortunately, Lt. Gov Dan Patrick is a bit of a killjoy and seems to be against legalizing gambling and capable of using his power in the senate to ensure that proposals will be dead in the water.

Even worse, the Texas state legislature only convenes in odd numbered years. For sports fans, this means that all of 2022 is wasted time because there is no ability to get any traction on an amendment. It’s hard to know which way the tea leaves will fall in 2023, but if legislators do decide they need to amend the Constitution in order to get gambling legalized, it almost certainly means that Super Bowl Sunday in 2023 will not have legalized gambling due to the need for an amendment election. At best, it’s a slow and steady trod. We’d guess there will be more mainstream support as other states continue to have success, but we are still a long way away from gambling in Texas.

Thanks for sticking with us this week. We know this may not have been as sexy or fun as other topics, but it’s good to deep dive on exactly what’s slowing down sports gambling in some of America’s biggest markets.