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78R3926 YDB-F
By: Flores H.B. No. 2439
A BILL TO BE ENTITLED
AN ACT
relating to the operation and administration of the state lottery,
including authorizing the Texas Lottery Commission to offer video
lottery; providing penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 466.002(10), Government Code, is amended
to read as follows:
(10) "Ticket" means any tangible evidence issued to
provide participation in a lottery game authorized by this chapter,
including a video lottery game under Subchapter J.
SECTION 2. Section 466.014(b), Government Code, is amended
to read as follows:
(b) The executive director may contract with or employ a
person to perform a function, activity, or service in connection
with the operation of the lottery as prescribed by the executive
director. A person with whom the executive director contracts to
operate a lottery, provide the central communications system for
video lottery under Subchapter J, or be a video lottery technology
provider must be eligible for a sales agent license under Section
466.155.
SECTION 3. Section 466.017(b), Government Code, is amended
to read as follows:
(b) The records of a [Each] lottery operator, video lottery
central communications system provider, video lottery technology
provider, video lottery retailer, or [operator's and] sales agent
[agent's records] are subject to audit by the commission and the
state auditor. For the purpose of carrying out this chapter, the
executive director or state auditor may examine all books, records,
papers, or other objects that the executive director or state
auditor determines are necessary for conducting a complete
examination under this chapter and may also examine under oath any
officer, director, or employee of a lottery operator or sales
agent. The executive director or state auditor may conduct an
examination at the principal office or any other office of the
lottery operator, video lottery central communications system
provider, video lottery technology provider, video lottery
retailer, or sales agent or may require the lottery operator, video
lottery central communications system provider, video lottery
technology provider, video lottery retailer, or sales agent to
produce the records at the office of the commission or state
auditor. If a sales agent refuses to permit an examination or to
answer any question authorized by this subsection, the executive
director may summarily suspend the license of the sales agent under
Section 466.160 until the examination is completed as required.
Section 321.013(h) does not apply to an audit of a lottery operator,
video lottery central communications system provider, video
lottery technology provider, video lottery retailer, or sales
agent.
SECTION 4. Section 466.018, Government Code, is amended to
read as follows:
Sec. 466.018. INVESTIGATIONS. The attorney general, the
district attorney for Travis County, or the district attorney,
criminal district attorney, or county attorney performing the
duties of district attorney for the county in which the violation or
alleged violation occurred may investigate a violation or alleged
violation of this chapter and of the penal laws of this state by the
commission or its employees, a sales agent, a lottery vendor, [or] a
lottery operator, a video lottery central communications system
provider, a video lottery technology provider, or a video lottery
retailer.
SECTION 5. Sections 466.020(c) and (e), Government Code,
are amended to read as follows:
(c) A security officer or investigator employed by the
department of security or a peace officer who is working in
conjunction with the commission or the Department of Public Safety
in the enforcement of this chapter, without a search warrant, may
search and seize a lottery vending machine, lottery computer
terminal, video lottery terminal, or other lottery equipment that
is located on premises for which a person holds a sales agent
license or video lottery retailer license issued under this
chapter.
(e) At least once every two years, the executive director
shall employ an independent firm that is experienced in security,
including computer security and systems security, to conduct a
comprehensive study of all aspects of lottery security, including:
(1) lottery personnel security;
(2) sales agent security;
(3) lottery operator and vendor security;
(4) security against ticket counterfeiting and
alteration and other means of fraudulent winning;
(5) security of lottery drawings;
(6) lottery computer, data communications, database,
and systems security;
(7) lottery premises and warehouse security;
(8) security of distribution of tickets;
(9) security of validation and payment procedures;
(10) security involving unclaimed prizes;
(11) security aspects of each lottery game;
(12) security against the deliberate placement of
winning tickets in lottery games that involve preprinted winning
tickets by persons involved in the production, storage,
transportation, or distribution of tickets; [and]
(13) security involving the video lottery central
communications system provider, video lottery technology
providers, and video lottery retailers; and
(14) other security aspects of lottery operations.
SECTION 6. Section 466.024(c), Government Code, is amended
to read as follows:
(c) In this section, "sports[:
[(1) "Sports] event" means a football, basketball,
baseball, or similar game, or a horse or dog race on which
pari-mutuel wagering is allowed.
[(2) "Video lottery machine" or "machine" means any
electronic video game machine that, upon insertion of cash, is
available to play or simulate the play of a video game, including
video poker, keno, and blackjack, using a video display and
microprocessors in which the player may receive free games or
credits that can be redeemed for cash, coins, or tokens, or that
directly dispenses cash, coins, or tokens.]
SECTION 7. Section 466.155(a), Government Code, is amended
to read as follows:
(a) After a hearing, the director shall deny an application
for a license or the commission shall suspend or revoke a license if
the director or commission, as applicable, finds that the applicant
or sales agent:
(1) is an individual who:
(A) has been convicted of a felony, criminal
fraud, gambling or a gambling-related offense, or a misdemeanor
involving moral turpitude, if less than 10 years has elapsed since
the termination of the sentence, parole, mandatory supervision, or
probation served for the offense;
(B) is or has been a professional gambler;
(C) is married to an individual:
(i) described in Paragraph (A) or (B); or
(ii) who is currently delinquent in the
payment of any state tax;
(D) is an officer or employee of the commission
or a lottery operator; or
(E) is a spouse, child, brother, sister, or
parent residing as a member of the same household in the principal
place of residence of a person described by Paragraph (D);
(2) is not an individual, and an individual described
in Subdivision (1):
(A) is an officer or director of the applicant or
sales agent;
(B) holds more than 10 percent of the stock in the
applicant or sales agent;
(C) holds an equitable interest greater than 10
percent in the applicant or sales agent;
(D) is a creditor of the applicant or sales agent
who holds more than 10 percent of the applicant's or sales agent's
outstanding debt;
(E) is the owner or lessee of a business that the
applicant or sales agent conducts or through which the applicant
will conduct a ticket sales agency;
(F) shares or will share in the profits, other
than stock dividends, of the applicant or sales agent; or
(G) participates in managing the affairs of the
applicant or sales agent;
(3) has been finally determined to be:
(A) delinquent in the payment of a tax or other
money collected by the comptroller, the Texas Workforce Commission,
or the Texas Alcoholic Beverage Commission;
(B) in default on a loan made under Chapter 52,
Education Code; or
(C) in default on a loan guaranteed under Chapter
57, Education Code;
(4) is a person whose location for the sales agency is:
(A) a location licensed for games of bingo under
Chapter 2001, Occupations Code; or
(B) on land that is owned by:
(i) this state; or
(ii) a political subdivision of this state
and on which is located a public primary or secondary school, an
institution of higher education, or an agency of the state; or
[(C) a location for which a person holds a wine
and beer retailer's permit, mixed beverage permit, mixed beverage
late hours permit, private club registration permit, or private
club late hours permit issued under Chapter 25, 28, 29, 32, or 33,
Alcoholic Beverage Code; or]
(5) has violated this chapter or a rule adopted under
this chapter.
SECTION 8. Subchapter G, Chapter 466, Government Code, is
amended by adding Section 466.318 to read as follows:
Sec. 466.318. SALE OF VIDEO LOTTERY GAME TO PERSON YOUNGER
THAN 18 YEARS OF AGE. (a) A video lottery retailer or an employee
of a video lottery retailer commits an offense if the person
intentionally or knowingly:
(1) sells or offers to sell a play of a video lottery
game to an individual the person knows is younger than 18 years of
age or permits the individual to purchase a play of a video lottery
game; or
(2) pays money or issues a video credit slip as
winnings for a play of a video lottery game to an individual the
person knows is younger than 18 years of age.
(b) An individual who is younger than 18 years of age
commits an offense if the individual:
(1) purchases a play of a video lottery game;
(2) accepts money or a video credit slip as payment of
winnings for a play of a video lottery game; or
(3) falsely represents the individual to be 18 years
of age or older by displaying evidence of age that is false or
fraudulent or misrepresents in any way the individual's age in
order to purchase a play of a video lottery game.
(c) An offense under Subsection (a) is a Class C
misdemeanor.
(d) An offense under Subsection (b) is a misdemeanor
punishable by a fine not to exceed $250.
SECTION 9. Chapter 466, Government Code, is amended by
adding Subchapter J to read as follows:
SUBCHAPTER J. VIDEO LOTTERY
Sec. 466.501. DEFINITIONS. In this subchapter:
(1) "Licensed video lottery retailer" means a
pari-mutuel license holder that holds a video lottery retailer
license under Subchapter J.
(2) "Net terminal income" means the total amount of
money paid to play video lottery games less the value of all credits
redeemed for money by the players of video lottery games.
(3) "Pari-mutuel license holder" means a person
licensed to conduct wagering on a greyhound race or a horse race
under the Texas Racing Act (Article 179e, Vernon's Texas Civil
Statutes).
(4) "Racetrack" has the meaning assigned by Section
1.03, Texas Racing Act (Article 179e, Vernon's Texas Civil
Statutes).
(5) "Video lottery game" means a single turn or
opportunity to play a video game on a video lottery terminal.
(6) "Video lottery terminal" means any electronic
computerized video game machine that:
(A) uses a video display and microprocessors;
(B) on the insertion of money or other
representation of value approved by the commission, is available to
play a video game; and
(C) provides the player with an opportunity to
receive free games or credits that may be redeemed for money.
(7) "Video lottery technology provider" means a person
that designs, manufactures, installs, operates, distributes, or
supplies for sale or use in this state a video lottery terminal or
related equipment.
Sec. 466.502. AUTHORITY TO OPERATE VIDEO LOTTERIES. (a)
Notwithstanding any other law, the commission may conduct video
lottery games in accordance with this subchapter.
(b) A video lottery terminal used to conduct video lottery
games on behalf of the commission may be installed and operated only
at a racetrack in existence on January 1, 2003, that is a licensed
video lottery retailer.
Sec. 466.503. RULES. The commission shall adopt rules for
the licensing of video lottery retailers and other rules necessary
to conduct video lottery games and administer this subchapter.
Sec. 466.504. VIDEO LOTTERY TECHNOLOGY PROVIDER CONTRACTS.
(a) The commission may award a contract to a person with equipment
and technology that are compatible with the central communications
system established under this subchapter to provide video lottery
terminals and services to licensed video lottery retailers. In
making a decision to award a contract to a technology provider, the
commission must consider:
(1) the experience of the provider in performing
comparable projects;
(2) the financial stability of the provider;
(3) the technical and management abilities of the
provider;
(4) the quality of the provider's product and service
capabilities;
(5) the likelihood of timely performance by the
provider;
(6) the maximum revenue generation;
(7) the license holder's eligibility under Section
466.155; and
(8) any other factors relevant to the performance of
the contract.
(b) A contract awarded to a technology provider under this
section must comply with the contract requirements of this chapter
and commission rule.
(c) At the expense of the technology provider, the
commission may use an independent testing laboratory to determine
whether a technology provider's system is compatible with the
central communications system.
Sec. 466.505. ADDITIONAL POWERS AND DUTIES OF COMMISSION.
To administer this subchapter, the commission shall:
(1) adopt accounting procedures to determine net
terminal income and procedures to handle unclaimed prizes and
credits;
(2) determine the type of video lottery games that may
be conducted;
(3) determine the amount a player may be charged to
play each video lottery game and the prizes or credits that may be
awarded;
(4) establish financial reporting procedures for a
licensed video lottery retailer;
(5) establish control procedures for video lottery
retailers that become insolvent;
(6) determine the insurance and bonding requirements
for:
(A) a licensed video lottery retailer; and
(B) a video lottery technology provider;
(7) establish the licensing requirements for a
licensed video lottery retailer;
(8) contract with persons to be video lottery
technology providers; and
(9) contract with a person to provide the central
communications system.
Sec. 466.506. CENTRAL COMMUNICATIONS SYSTEM. (a) The
commission shall select a person to establish a central
communications system to link all video lottery terminals operated
on behalf of the commission under this subchapter to provide the
auditing and other information required by the commission. The
person selected must provide all computer hardware and software
necessary to implement and operate the system.
(b) The central communications system provider selected by
the commission may not limit participation in this state's video
lottery to only one manufacturer of video lottery machines through:
(1) the high costs that a manufacturer would incur to
implement the program modifications necessary to communicate or
link with the system; or
(2) the inability of video lottery machines of more
than one manufacturer to communicate or link with the system.
(c) The central communications system provider may not sell
or distribute video lottery terminals in this state.
Sec. 466.507. VIDEO LOTTERY RETAILERS. Except as otherwise
provided by this subchapter or commission rule, the provisions
governing the licensing, renewal, denial, suspension, and
revocation of a sales agent license under Subchapter D and the
criminal history investigations under Subchapter E apply to a video
lottery retailer.
Sec. 466.508. EXECUTIVE DIRECTOR DUTIES. The executive
director shall:
(1) supervise and administer the operation of video
lottery games in accordance with this chapter and commission rules;
and
(2) enter into contracts for the operation of a video
lottery central communications system and with persons to act as
video lottery technology providers.
Sec. 466.509. VIDEO LOTTERY GAMES. A video lottery
retailer may offer video lottery games approved by the commission
at the retailer's racetrack at times when the retailer is not
conducting a pari-mutuel event.
Sec. 466.510. DIVISION OF REVENUE. (a) The net terminal
income derived from video lottery games shall be distributed as
follows:
(1) a portion shall be retained by the licensed video
lottery retailer in an amount equal to:
(A) 31 percent in the fiscal year ending August
31, 2004;
(B) 30.5 percent in the fiscal year ending August
31, 2005;
(C) 30 percent in the fiscal year ending August
31, 2006;
(D) 29.5 percent in the fiscal year ending August
31, 2007; and
(E) 29 percent in the fiscal year ending August
31, 2008, and in each subsequent fiscal year;
(2) a portion shall be paid to each video lottery
technology provider in an amount equal to 11 percent of the net
terminal income of the video lottery terminals provided by the
technology provider, less a reasonable fee paid to the central
communications system provider for the implementation,
maintenance, and operation of the system; and
(3) the remainder shall be deposited to the credit of
the state lottery account in the general revenue fund.
(b) The commission shall set the fee paid to the central
communications system provider under Subsection (a)(3) at an amount
not to exceed two and one-half percent of the net terminal income.
(c) A video lottery retailer shall transfer all unclaimed
prizes and credits to the commission to be used for future prizes.
(d) The amounts deposited under this section to the state
lottery account are subject to Section 466.355.
Sec. 466.511. PENALTY FOR MANIPULATION OR TAMPERING. (a) A
person commits an offense if the person intentionally or knowingly
manipulates the outcome of a video lottery game, the amount of a
video lottery game prize, or the operation of a video lottery
terminal by physical, electronic, or other means.
(b) An offense under this section is a felony of the third
degree.
Sec. 466.512. PRIZE EXEMPT FROM TAXATION. A prize received
under this subchapter is exempt from taxation as provided by
Section 466.004.
Sec. 466.513. APPLICABILITY OF OTHER LAW AND LOCAL
ORDINANCES. (a) This chapter and Chapter 467 govern the operation
and administration of video lottery under this subchapter to the
extent not in conflict with this subchapter.
(b) To the extent of any conflict, the provisions of this
subchapter prevail over any other law or a local ordinance.
(c) A local option election under Article 16, Texas Racing
Act (Article 179e, Vernon's Texas Civil Statutes), does not apply
to video lottery operated in accordance with this subchapter.
SECTION 10. Section 467.035(a), Government Code, is amended
to read as follows:
(a) The commission may not employ or continue to employ a
person who owns a financial interest in:
(1) a bingo commercial lessor, bingo distributor, or
bingo manufacturer; [or]
(2) a lottery sales agency or a lottery operator; or
(3) a video lottery central communications system
provider, video lottery technology provider, or video lottery
retailer.
SECTION 11. Section 47.09, Penal Code, is amended by adding
Subsection (c) to read as follows:
(c) Subsection (a)(3) applies to a person manufacturing,
possessing, or operating a gambling device with the authorization
of the Texas Lottery Commission under Subchapter J, Chapter 466,
Government Code.
SECTION 12. Chapter 47, Penal Code, is amended by adding
Section 47.095 to read as follows:
Sec. 47.095. INTERSTATE OR FOREIGN COMMERCE DEFENSE. It is
a defense to prosecution under this chapter that a person sells,
leases, transports, possesses, stores, or manufactures a gambling
device with the authorization of the Texas Lottery Commission under
Subchapter J, Chapter 466, Government Code, for transportation in
interstate or foreign commerce.
SECTION 13. Section 466.024(b), Government Code, is
repealed.
SECTION 14. (a) As soon as practicable after the effective
date of this Act, the Texas Lottery Commission shall adopt the rules
necessary to implement video lottery in accordance with Subchapter
J, Chapter 466, Government Code, as added by this Act.
(b) The Texas Lottery Commission may adopt an emergency rule
under Subsection (a) of this section without prior notice or
hearing, or with any abbreviated notice and hearing as the
commission finds practicable, for the implementation of the change
in law made by this Act. Section 2001.034, Government Code, does
not apply to an emergency rule adopted under this section.
(c) To promptly implement Subchapter J, Chapter 466,
Government Code, as added by this Act, a contract for the
acquisition or provision of facilities, supplies, equipment,
materials, or services related to the initial operation of video
lottery under that subchapter is not subject to:
(1) Subtitle D, Title 10, Government Code;
(2) Section 466.101, Government Code;
(3) Chapter 2161, Government Code; or
(4) any competitive bidding requirements or contract
requirements provided by any other law or by rules of the Texas
Lottery Commission.
SECTION 15. This Act takes effect immediately if it
receives a vote of two-thirds of all the members elected to each
house, as provided by Section 39, Article III, Texas Constitution.
If this Act does not receive the vote necessary for immediate
effect, this Act takes effect September 1, 2003.