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Amend CSHB 3 (Senate committee printing) on third reading as
follows:
Add the following SECTIONS, appropriately numbered, to read
as follows:
SECTION 2.01. Section 466.002, Government Code, is amended
by amending Subdivisions (2)-(10) and adding Subdivisions
(11)-(36) to read as follows:
(2) "Communication technology" means the methods used
and the components employed to facilitate the transmission of
information, including transmission and reception systems that
transmit information through wire, cable, radio, microwave, light,
optics, or computer data networks.
(3) "Director" means a [the] director employed by the
executive director under Section 467.033 [of the division].
(4) "Disable" with respect to video lottery terminals
means the process that causes a video lottery terminal to cease
functioning on issuance of a shutdown command from the video
lottery central system.
(5) "Distribute," with respect to a video lottery
terminal, an electronic computer component of a video lottery
terminal, the cabinet in which a video lottery terminal is housed,
video lottery equipment, or video lottery game software intended
for use or play in this state, including on Indian lands in this
state, means the sale, lease, marketing, offer, or other
disposition of any of those items.
(6) [(3)] "Division" means the lottery division
established by the commission under Chapter 467.
(7) "Electronic storage medium," with respect to video
lottery, means the electronic medium on which the operation
software for a game playable on a video lottery terminal is stored
in the form of erasable programmable read only memory, compact
disc-read only memory, flash random access memory, or other
technology medium the commission approves for use in a video
lottery terminal.
(8) [(4)] "Executive director" means the executive
director of the commission.
(9) "Gaming agreement" means an agreement authorized
under Subchapter K between this state and a federally recognized
Indian tribe under which this state allows the tribe to conduct
limited gaming activities authorized under this chapter or
applicable federal law.
(10) "House-banked game" means a game of chance in
which:
(A) the house plays as a participant;
(B) the house competes against all players,
collects from all losers, and pays all winners; and
(C) the house has an opportunity to win.
(11) "Indian lands" means:
(A) land located within an Indian reservation and
occupied by an Indian tribe on January 1, 1998; and
(B) land occupied by an Indian tribe on January
1, 1998, over which an Indian tribe exercises governmental power
and the title to which is:
(i) held in trust by the United States for
the benefit of an Indian tribe or individual member of an Indian
tribe; or
(ii) held by an Indian tribe or an
individual member of an Indian tribe and subject to restriction by
the United States against alienation.
(12) "Institutional investor" means:
(A) a state or federal government pension plan;
or
(B) any of the following that meets the
requirements of a "qualified institutional buyer" as defined in
Rule 144A, Securities Act of 1933 (15 U.S.C. Sections 77a-77aa),
and the rules and regulations adopted under that rule by the United
States Securities and Exchange Commission:
(i) a bank as defined by Section 3(a)(6),
Securities Exchange Act of 1934 (15 U.S.C. Sections 78a-78kk), and
the rules and regulations adopted under that act by the United
States Securities and Exchange Commission;
(ii) an insurance company as defined by
Section 2(a)(17), Investment Company Act of 1940 (15 U.S.C. Section
80a-1 et seq.);
(iii) an investment company registered
under Section 8, Investment Company Act of 1940 (15 U.S.C. Section
80a-1 et seq.);
(iv) an employee benefit plan or pension
fund subject to the Employee Retirement Income Security Act of 1974
(29 U.S.C. Section 1001 et seq.), excluding an employee benefit
plan or pension fund sponsored by a publicly traded corporation
registered with the Securities and Exchange Commission;
(v) a group composed entirely of persons
specified by this subdivision; or
(vi) any other person the commission
recognizes as an institutional investor for reasons consistent with
the policies expressed in this chapter.
(13) [(5)] "Lottery" means the state lottery
established and operated in accordance with the Texas Constitution
under this chapter and includes the operation of a state-controlled
video lottery system [procedures operated by the state under this
chapter through which prizes are awarded or distributed by chance
among persons who have paid, or unconditionally agreed to pay, for a
chance or other opportunity to receive a prize].
(14) [(6)] "Lottery game" means an activity conducted
lawfully and in accordance with the Texas Constitution and this
chapter that is controlled by this state as part of the lottery and
through which prizes are awarded or distributed by chance to
persons who have paid or unconditionally agreed to pay, or who
otherwise participate in a game, for a chance or other opportunity
to receive a prize [includes a lottery activity].
(15) [(7)] "Lottery operator" means a person selected
under Section 466.014(b) to operate a lottery game.
(16) "Manufacture," with respect to a video lottery
terminal, an electronic computer component of a video lottery
terminal, the cabinet in which a video lottery terminal is housed,
video lottery equipment, or video lottery game software intended
for use or play in this state, including on Indian lands in this
state, means to design, assemble, fabricate, produce, program, or
make modifications to any of those items.
(17) "Net terminal income" means the total amount of
money paid to play video lottery games less the value of all credits
redeemed for money, including any progressive prizes and bonuses,
by the players of the video lottery games. Promotional prizes
unrelated to video lottery game wagers that are offered by a video
lottery retailer or video lottery manager may not be deducted or
otherwise considered credits redeemed for money by players for the
purpose of determining net terminal income.
(18) "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).
(19) "Person" means, for purposes of video lottery
operations, any natural person, corporation, association, trust,
partnership, limited partnership, joint venture, subsidiary, or
other entity, regardless of its form, structure, or nature.
(20) [(8)] "Player" means a person who contributes any
part of the consideration for a ticket or to play a video lottery
game under this chapter.
(21) "Racetrack" means a racetrack as defined by
Section 1.03(25), Texas Racing Act (Article 179e, Vernon's Texas
Civil Statutes).
(22) [(9)] "Sales agent" or "sales agency" means a
person licensed under this chapter to sell tickets.
(23) "Slot machine" means a mechanical, electrical, or
other type of device, contrivance, or machine that plays or
operates on insertion of a coin, currency, token, or similar object
or on payment of any other consideration, and the play or operation
of which, through the skill of the operator, by chance, or both, may
deliver to the person playing or operating the machine, or entitle
the person to receive, cash, premiums, merchandise, tokens, or any
other thing of value, whether the payoff is made automatically from
the machine or in any other manner. The term does not include any
equipment, machine, technological aid, or other device used or
authorized in connection with the play of bingo under Chapter 2001,
Occupations Code.
(24) "Substantial interest holder" means any of the
following that is not a bona fide lender, bank, or other authorized
or licensed lending institution that holds a mortgage or other lien
acquired in the ordinary course of business or a vendor of the
applicant or license holder that is not otherwise a substantial
business holder:
(A) a person who directly, indirectly, or
beneficially owns any interest in a privately owned corporation,
association, trust, partnership, limited partnership, joint
venture, subsidiary, or other entity, regardless of its form,
structure, or nature;
(B) a person who directly, indirectly, or
beneficially owns 10 percent or more of any publicly owned
corporation, association, trust, partnership, limited partnership,
joint venture, subsidiary, or other entity, regardless of its form,
structure, or nature;
(C) a person associated with an applicant or
license holder who the commission determines has the power or
authority to:
(i) control the activities of the applicant
or license holder; or
(ii) elect or select the executive
director, the managers, the partners, or a majority of the board of
directors of the applicant or license holder; and
(D) any key personnel of a video lottery retailer
or video lottery manager, including an executive director, officer,
director, manager, member, partner, limited partner, executive,
employee, or agent, who the commission determines has the power to
exercise significant influence over decisions concerning any part
of the applicant's or license holder's business operation.
(25) [(10)] "Ticket" means any tangible evidence
issued to provide participation in a lottery game authorized by
this chapter other than a video lottery game.
(26) "Video lottery central system" means the system
of procedures and facilities operated and controlled by the
commission that is designed to link together all video lottery
terminals operated in this state and allows the commission to
continuously monitor the activity of each video lottery terminal
and to disable any video lottery terminal in this state.
(27) "Video lottery central system provider" means a
person that, under a contract with the commission, provides the
video lottery central system.
(28) "Video lottery equipment" means:
(A) a video lottery terminal;
(B) equipment, a component, or a contrivance used
remotely or directly in connection with a video lottery terminal
to:
(i) affect the reporting of gross revenue
and other accounting information, including a device for weighing
and counting money;
(ii) connect video lottery terminals
together for accounting or wide-area prize or progressive prize
purposes;
(iii) monitor video lottery terminal
operations; and
(iv) provide for the connection of video
lottery terminals to the video lottery central system; or
(C) any other communications technology or
equipment necessary for the operation of a video lottery terminal.
(29) "Video lottery game" means an electronically
simulated game displayed on a video lottery terminal the outcome of
which is determined solely by chance based on a computer-generated
random selection of winning combinations of symbols or numbers
other than roulette, dice, or baccarat game themes associated with
casino gambling, except that game themes displaying symbols that
appear to roll on drums to simulate a classic casino slot machine or
themes of other card games and keno may be used.
(30) "Video lottery manager" means a person who:
(A) is licensed by the commission under this
chapter to manage a video lottery terminal establishment at a
racetrack; or
(B) provides management services for a video
lottery terminal establishment on Indian lands.
(31) "Video lottery retailer" means a racetrack at
which a video lottery terminal establishment is located and that
holds a video lottery retailer license under Subchapter K.
(32) "Video lottery system" has the meaning assigned
to that term by Section 47(f), Article III, Texas Constitution.
(33) "Video lottery terminal" means an interactive
electronic device that is capable of displaying video lottery
games.
(34) "Video lottery terminal establishment" means
premises at which the operation of video lottery terminals is
authorized by the commission under this chapter in accordance with
a license or a gaming agreement.
(35) "Video lottery terminal provider" means a person
in the business of manufacturing or distributing video lottery
terminals in this state.
(36) "Video lottery ticket" means the tangible
evidence issued by a video lottery terminal to reflect winnings
from the play of a video lottery game.
SECTION 2.02. Section 466.003, Government Code, is amended
by amending Subsection (b) and adding Subsection (c) to read as
follows:
(b) Any [A] contract or authorized agreement between the
division and a lottery operator, the video lottery central system
provider, a video lottery terminal provider, or a manufacturer or
distributor of video lottery games under Section 466.014(b) must
contain a provision allowing the contract or authorized agreement
to be terminated without penalty should the division be abolished
unless another state agency is assigned to regulate all video
lottery game activity as required by this chapter.
(c) Notwithstanding Subsection (a), if any gaming agreement
that allows video lottery is in effect, the commission or another
state agency designated by the legislature must regulate video
lottery games as necessary to comply with a gaming agreement under
this chapter.
SECTION 2.03. Section 466.004(a), Government Code, is
amended to read as follows:
(a) A political subdivision of this state may not impose:
(1) a tax on the sale of a ticket;
(2) a tax on the payment of a prize under this chapter;
[or]
(3) an ad valorem tax on tickets;
(4) a tax, fee, or other assessment on consideration
paid to play a video lottery game; or
(5) a tax or fee for attendance or admission to a video
lottery establishment or a racetrack at which a video lottery
establishment is located unless specifically authorized by
statute.
SECTION 2.04. Section 466.014, Government Code, is amended
to read as follows:
Sec. 466.014. POWERS AND DUTIES OF COMMISSION AND EXECUTIVE
DIRECTOR; CONTRACT AUTHORITY. (a) The commission and executive
director have broad authority and shall exercise strict control and
close supervision over [all] lottery games [conducted in this
state] to promote and ensure integrity, security, honesty, and
fairness in the operation and administration of the lottery.
(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 contract relating to the operation of video lottery
must be consistent with Subchapter K. Except as provided by this
subsection, a [A] person with whom the executive director contracts
to operate a lottery game must be eligible for a sales agent license
under Section 466.155. A person with whom the executive director
contracts to provide the video lottery central system must be
eligible under the same standards as those applicable to the
registration or approval by the commission of a video lottery
terminal provider in accordance with Subchapter K.
(c) The executive director may award a contract for lottery
supplies, equipment, or services, including a contract under
Subsection (b), pending the completion of any investigation and
licensing, registration, or other approval authorized or required
by this chapter. A contract awarded under this subsection must
include a provision permitting the executive director to terminate
the contract without penalty if the investigation reveals that the
person to whom the contract is awarded would not be eligible for a
sales agent license under Section 466.155 or with regard to video
lottery does not satisfy the applicable requirements for licensing,
registration, or other approval under Subchapter K.
(e) In the acquisition or provision of facilities,
supplies, equipment, materials, or services related to the
implementation of video lottery, the commission is exempt from:
(1) procurement procedures prescribed under:
(A) Subtitle D, Title 10; and
(B) Section 466.101; and
(2) any bidding or contract requirements provided by
any other law or by commission rules.
(f) Subsection (e) and this subsection expire January 1,
2008.
SECTION 2.05. Section 466.015(b), Government Code, is
amended to read as follows:
(b) The commission shall adopt rules to the extent they are
not inconsistent with Chapters 551 and 552 governing the:
(1) security for the lottery and the commission,
including the development of an internal security plan;
(2) apportionment of the total revenues from the sale
of tickets and from all other sources in the amounts provided by
this chapter;
(3) enforcement of prohibitions on the sale of tickets
to or by an individual younger than 18 years of age or the sale of a
video lottery game to or by an individual younger than 21 years of
age; [and]
(4) enforcement of prohibitions on a person playing a
lottery game by telephone; and
(5) enforcement of prohibitions provided by law on the
sale of any purchase or play of a video lottery game.
SECTION 2.06. Section 466.017, Government Code, is amended
to read as follows:
Sec. 466.017. AUDITS. (a) The commission [executive
director] shall provide for a certified public accountant to
conduct an independent audit of the commission's annual financial
statements in accordance with generally accepted auditing
standards that requires the accountant to express an opinion on the
conformity of the financial statements with generally accepted
accounting principles [for each fiscal year of all accounts and
transactions of the lottery]. The certified public accountant may
not have[, as determined by the executive director,] a significant
financial interest in a sales agent, lottery vendor, [or] lottery
operator, video lottery manager, video lottery retailer, video
lottery terminal provider, or video lottery central system
provider. The certified public accountant shall present an audit
report to the executive director, the commission, the governor, the
comptroller, and the legislature not later than the 30th day after
the submission date for the annual financial report required by the
General Appropriations Act. [The report must contain
recommendations to enhance the earnings capability of the lottery
and improve the efficiency of lottery operations.] The state
auditor may review the results of and working papers related to the
audit.
(b) The records of a [Each] lottery operator, sales agent,
video lottery manager, video lottery retailer, video lottery
terminal provider, or video lottery central system provider
[operator's and sales 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, video lottery manager, video lottery retailer, video
lottery terminal provider, or video lottery central system
provider. The executive director or state auditor may conduct an
examination at the principal office or any other office of the
person subject to the audit [lottery operator or sales agent] or may
require the person [lottery operator or sales agent] to produce the
records at the office of the commission or state auditor. If a
sales agent, video lottery manager, video lottery retailer, video
lottery terminal provider, or video lottery central system provider
refuses to permit an examination or to answer any question
authorized by this subsection, the executive director may summarily
suspend the license or registration of the sales agent, video
lottery manager, video lottery retailer, or video lottery terminal
provider under Section 466.160 or Subchapter K until the
examination is completed as required. Section 321.013(h) does not
apply to an audit of a lottery operator, [or] sales agent, video
lottery manager, video lottery retailer, video lottery terminal
provider, or video lottery central system provider.
SECTION 2.07. 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 manager, a video lottery
retailer, a video lottery terminal provider, or a video lottery
central system provider.
SECTION 2.08. Sections 466.020(c), (d), 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 may:
(1) [,] without a search warrant, [may] search and
seize a lottery vending machine, lottery computer terminal, video
lottery terminal, or other lottery or gaming equipment that is
located on premises for which a person holds a sales agent, video
lottery retailer, or video lottery manager license issued under
this chapter; or
(2) seize a lottery vending machine, lottery computer
terminal, video lottery terminal, or other lottery or gaming
equipment that is being used or is in the possession of any person
in violation of this chapter.
(d) The Department of Public Safety or any other state or
local law enforcement agency in this state, at the commission's
request and in accordance with an interagency agreement, shall
perform a full criminal background investigation of a prospective
deputy or investigator of the department of security. The
commission shall reimburse the agency [Department of Public Safety]
for the actual costs of an investigation.
(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 of video lottery retailers, video
lottery managers, video lottery terminal providers, and video
lottery central system providers; and
(14) other security aspects of lottery operations,
including video lottery game operations.
SECTION 2.09. Section 466.021(a), Government Code, is
amended to read as follows:
(a) The executive director shall, every two years, employ an
independent firm experienced in demographic analysis to conduct a
demographic study of lottery players. The study must examine
[include] the income, age, sex, race, education, and frequency of
participation of players. The study must distinguish between
players of traditional lottery games and video lottery games.
SECTION 2.10. Section 466.022, Government Code, is amended
by amending Subsection (b) and adding Subsections (c), (d), (e),
and (f) to read as follows:
(b) In addition to commission records excepted from
disclosure under Chapter 552, the following information is
confidential and is exempt from disclosure:
(1) security plans and procedures of the commission
designed to ensure the integrity and security of the operation of
the lottery;
(2) information of a nature that is designed to ensure
the integrity and security of the selection of winning tickets or
numbers in the lottery, other than information describing the
general procedures for selecting winning tickets or numbers; [and]
(3) the street address and telephone number of a prize
winner, if the prize winner has not consented to the release of the
information; and
(4) information relating to all system operations of
video lottery games, including the operation of the video lottery
system, security related to video lottery games, and commission
plans and procedures intended to ensure the integrity and security
of the operation of video lottery games.
(c) Information that is confidential under Subsection
(b)(4) includes information and data that:
(1) are furnished to the commission under Subchapter K
or that may be otherwise obtained by the commission from any source;
(2) pertain to an applicant's criminal record,
antecedents, and background and are furnished to or obtained by the
commission from any source, including information obtained by the
commission under Section 411.108(d);
(3) are provided to the commission, a commission
employee, or an investigator acting on behalf of the commission by a
governmental agency or an informer or on the assurance that the
information will be held in confidence and treated as confidential;
(4) are obtained by the commission from a video
lottery manager, video lottery retailer, video lottery terminal
provider, or video lottery central system provider; or
(5) are prepared or obtained by an agent or employee of
the commission relating to a license, registration, or renewal
application, a finding of suitability, or any approval required
under Subchapter K.
(d) Information that qualifies as confidential under
Subsection (b)(4) may be disclosed in whole or in part only as
necessary to administer this chapter or under a court order. The
commission, subject to appropriate procedures, may disclose the
information and data to an authorized agent of a political
subdivision of this state, the United States, another state or a
political subdivision of another state, a tribal law enforcement
agency, or the government of a foreign country.
(e) For the annual report required under Section 466.016,
the commission may disclose a compilation of statistical
information that is otherwise confidential under Subsection (b)(4)
if the compilation does not disclose the identity of an applicant,
license or registration holder, or video lottery establishment.
(f) Notwithstanding any other provision of state law, the
information provided under Subsection (d) or (e) may not otherwise
be disclosed without specific commission authorization.
SECTION 2.11. Section 466.024, Government Code, is amended
to read as follows:
Sec. 466.024. PROHIBITED GAMES. (a) The executive
director, [or] a lottery operator, a video lottery manager, a video
lottery retailer, a video lottery terminal provider, or a video
lottery central system provider may not establish or operate a
lottery game in which the winner is chosen on the basis of the
outcome of a live sports event.
(b) The [commission shall adopt rules prohibiting the]
operation of any game using a video lottery machine, slot [or]
machine, or other gambling device that is not connected to the video
lottery central system and regulated by this state as required by
Section 47, Article III, Texas Constitution, and this chapter is
prohibited.
(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 2.12. Section 466.025, Government Code, is amended
to read as follows:
Sec. 466.025. REPORTS OF TICKETS SOLD, NET TERMINAL INCOME,
AND PRIZES AWARDED. For each lottery game, other than a video
lottery game, after the last date on which a prize may be claimed
under Section 466.408(d), the director shall prepare a report that
shows the total number of tickets sold and the number and amounts of
prizes awarded in the game. The report must be available for public
inspection. For video lottery games, the director shall prepare a
weekly report that shows net terminal income for the preceding
week.
SECTION 2.13. Section 466.103(a), Government Code, is
amended to read as follows:
(a) Except as provided by Subsection (b), the executive
director may not award a contract for the purchase or lease of
facilities, goods, or services related to lottery operations to a
person who:
(1) would be denied a license as a sales agent under
Section 466.155; or
(2) with regard to video lottery equipment:
(A) is not a registered video lottery terminal
provider if registration is required; or
(B) would be deemed unsuitable to be a video
lottery terminal provider under Subchapter K.
SECTION 2.14. Section 466.110, Government Code, is amended
to read as follows:
Sec. 466.110. PROHIBITED ADVERTISEMENTS. The legislature
intends that advertisements or promotions sponsored by the
commission or the division for the lottery not be of a nature that
unduly influences any person to purchase a lottery ticket or number
or play a video lottery game.
SECTION 2.15. Section 466.151(b), Government Code, is
amended to read as follows:
(b) The executive director may establish a provisional
license or other classes of licenses necessary to regulate and
administer the quantity and type of lottery games provided at each
licensed location of a sales agent.
SECTION 2.16. Section 466.158(a), Government Code, is
amended to read as follows:
(a) Unless suspended or revoked, a license issued under this
subchapter expires on the date specified in the license, which may
not be later than the fifth [second] anniversary of its date of
issuance.
SECTION 2.17. Section 466.201(a), Government Code, is
amended to read as follows:
(a) The commission is entitled to conduct an investigation
of and is entitled to obtain criminal history record information
maintained by the Department of Public Safety, the Federal Bureau
of Investigation Identification Division, or another law
enforcement agency to assist in the investigation of:
(1) a sales agent or an applicant for a sales agent
license;
(2) a person required to be named in a license
application;
(3) a lottery operator, video lottery manager, video
lottery retailer, video lottery terminal provider, or video lottery
central system provider, or prospective lottery operator, video
lottery manager, video lottery retailer, video lottery terminal
provider, or video lottery central system provider;
(4) an employee of a lottery operator, video lottery
manager, video lottery retailer, video lottery terminal provider,
or video lottery central system provider or prospective lottery
operator, video lottery manager, video lottery retailer, video
lottery terminal provider, or video lottery central system
provider, if the employee is or will be directly involved in lottery
operations;
(5) a person who manufactures or distributes lottery
equipment or supplies, or a representative of a person who
manufactures or distributes lottery equipment or supplies offered
to the lottery;
(6) a person who has submitted a written bid or
proposal to the commission in connection with the procurement of
goods or services by the commission, if the amount of the bid or
proposal exceeds $500;
(7) an employee or other person who works for or will
work for a sales agent or an applicant for a sales agent license;
(8) a person who proposes to enter into or who has a
contract with the commission to supply goods or services to the
commission; or
(9) if a person described in Subdivisions (1) through
(8) is not an individual, an individual who:
(A) is an officer or director of the person;
(B) holds more than 10 percent of the stock in the
person;
(C) holds an equitable interest greater than 10
percent in the person;
(D) is a creditor of the person who holds more
than 10 percent of the person's outstanding debt;
(E) is the owner or lessee of a business that the
person conducts or through which the person will conduct
lottery-related activities;
(F) shares or will share in the profits, other
than stock dividends, of the person;
(G) participates in managing the affairs of the
person; or
(H) is an employee of the person who is or will be
involved in:
(i) selling tickets; or
(ii) handling money from the sale of
tickets.
SECTION 2.18. Subchapter E, Chapter 466, Government Code,
is amended by adding Section 466.206 to read as follows:
Sec. 466.206. CRIMINAL HISTORY INVESTIGATION FOR VIDEO
LOTTERY. (a) Except as otherwise provided by this section,
Sections 466.020 and 466.201, and Subchapter K, a criminal history
investigation of a video lottery retailer, video lottery manager,
video lottery terminal provider, or video lottery central system
provider is governed by commission rules adopted under Subchapter
K, which may consider a criminal history investigation conducted
under the Texas Racing Act (Article 179e, Vernon's Texas Civil
Statutes).
(b) The Department of Public Safety or a state or local law
enforcement agency in this state, in accordance with an interagency
agreement with the commission, shall provide any assistance
requested by the commission in the administration and enforcement
of this chapter, including conducting background investigations of
a person seeking a license, registration, or other commission
authorization required under Subchapter K or of any person required
to be named in an application for a license, registration, or other
commission authorization under that subchapter.
(c) This section does not limit the commission's right to
obtain criminal history record information from any other local,
state, or federal agency. The commission may enter into a
confidentiality agreement with the agency as necessary and proper.
(d) Except as otherwise provided by Section 411.108(d) or
another provision of this chapter, criminal history record
information obtained by the commission under this section may be
disclosed only:
(1) to another law enforcement agency to assist in or
further an investigation related to the commission's operation and
oversight of video lottery; or
(2) under a court order.
SECTION 2.19. Section 466.252, Government Code, is amended
to read as follows:
Sec. 466.252. PLAYER [PURCHASE OF TICKET] AGREEMENT TO
ABIDE BY RULES AND INSTRUCTIONS. (a) By purchasing a ticket in a
particular lottery game or participating as a player in a lottery
game, a player agrees to abide by and be bound by the commission's
rules and instructions, including the rules or instructions
applicable to the particular lottery game involved. The player
also acknowledges that the determination of whether the player is a
valid winner is subject to:
(1) the commission's rules, instructions, and claims
procedures, including those developed for the particular lottery
game involved; [and]
(2) any validation tests established by the commission
for the particular lottery game involved; and
(3) the limitations and other provisions prescribed by
this chapter.
(b) If the lottery uses tickets, an abbreviated form of the
rules or a reference to the rules may appear on the tickets.
SECTION 2.20. Section 466.3011, Government Code, is amended
to read as follows:
Sec. 466.3011. VENUE. Venue is proper in Travis County or
any county in which venue is proper under Chapter 13, Code of
Criminal Procedure, for:
(1) an offense under this chapter;
(2) an offense under the Penal Code, if the accused:
(A) is a lottery operator, lottery vendor, sales
agent, video lottery manager, video lottery retailer, video lottery
terminal provider, video lottery central system provider, or
employee of the division; and
(B) is alleged to have committed the offense
while engaged in lottery activities, including video lottery
activities; or
(3) an offense that involves property consisting of or
including lottery tickets under Title 7 or 11, Penal Code.
SECTION 2.21. Subchapter G, Chapter 466, Government Code,
is amended by adding Section 466.3031 to read as follows:
Sec. 466.3031. UNAUTHORIZED OPERATION, USE, OR POSSESSION
OF VIDEO LOTTERY TERMINAL. (a) A person may not operate, use, or
possess a video lottery terminal unless the operation, use, or
possession is expressly authorized by this chapter or other law.
(b) Except for transport to or from a video lottery
establishment and as provided by this chapter, a person commits an
offense if the person operates, uses, or possesses any video
lottery terminal that is not at all times connected to the video
lottery central system or that does not generate revenue for this
state, except funds retained by the commission to pay
administrative costs. An offense under this subsection is a felony
of the third degree.
(c) Notwithstanding Subsection (b), a video lottery
retailer, video lottery manager, or registered or approved video
lottery terminal provider may store or possess a video lottery
terminal as authorized by the commission, and the commission may
possess video lottery terminals for study and evaluation.
(d) Nothing in this section shall be construed to prohibit
the operation, use, or possession of equipment, machines,
technological aids, or other devices allowed in connection with the
play of bingo under Chapter 2001, Occupations Code.
SECTION 2.22. Section 466.305(a), Government Code, is
amended to read as follows:
(a) A sales agent, video lottery manager, or video lottery
retailer, or an employee of a sales agent, video lottery manager, or
video lottery retailer, commits an offense if the person
intentionally or knowingly sells a ticket to another person or
allows the person to play or conduct a game on a video lottery
terminal by extending credit or lending money to the person to
enable the person to purchase the ticket or play the game.
SECTION 2.23. The heading to Section 466.3051, Government
Code, is amended to read as follows:
Sec. 466.3051. SALE [OF TICKET] TO OR PURCHASE OF LOTTERY
TICKET BY PERSON YOUNGER THAN 18; PLAY OF LOTTERY GAME BY PERSON
YOUNGER THAN 21 [YEARS OF AGE].
SECTION 2.24. Section 466.3051, Government Code, is amended
by adding Subsections (a-1) and (b-1) and amending Subsections
(b)-(f) to read as follows:
(a-1) A video lottery manager, a video lottery retailer, or
an employee of a video lottery manager or video lottery retailer
commits an offense if the person intentionally or knowingly allows
a person younger than 21 years of age to play a video lottery game.
(b) An individual who is younger than 18 years of age
commits an offense if the individual:
(1) purchases a lottery ticket; or
(2) 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 lottery ticket.
(b-1) An individual who is younger than 21 years of age
commits an offense if the individual:
(1) plays a video lottery game; or
(2) falsely represents the individual to be 21 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 play a video lottery game.
(c) A person 18 years of age or older may purchase a lottery
ticket to give as a gift to another person, including an individual
younger than 18 years of age.
(d) It is a defense to the application of Subsection (b)
that the individual younger than 18 years of age is participating in
an inspection or investigation on behalf of the commission or other
appropriate governmental entity regarding compliance with this
section. It is a defense to the application of Subsection (b-1) that
the individual younger than 21 years of age is participating in an
inspection or investigation on behalf of the commission or other
appropriate governmental entity regarding compliance with this
section.
(e) An offense under Subsection (a) or (a-1) is a Class C
misdemeanor.
(f) An offense under Subsection (b) or (b-1) is punishable
by a fine not to exceed $250.
SECTION 2.25. Section 466.3053, Government Code, is amended
to read as follows:
Sec. 466.3053. PURCHASE OF TICKET OR VIDEO LOTTERY GAME
WITH PROCEEDS OF AFDC CHECK OR FOOD STAMPS. (a) A person commits an
offense if the person intentionally or knowingly purchases a ticket
or plays a video lottery game with:
(1) the proceeds of a check issued as a payment under
the Aid to Families with Dependent Children program administered
under Chapter 31, Human Resources Code; or
(2) a food stamp coupon issued under the food stamp
program administered under Chapter 33, Human Resources Code.
(b) An offense under this section is a Class C misdemeanor.
SECTION 2.26. Section 466.306, Government Code, is amended
to read as follows:
Sec. 466.306. FORGERY; ALTERATION OF TICKET. (a) A person
commits an offense if the person intentionally or knowingly alters
or forges a ticket or video lottery ticket.
(b) An offense under this section is a felony of the third
degree unless it is shown on the trial of the offense that the prize
alleged to be authorized by the ticket or video lottery ticket
forged or altered is greater than $10,000, in which event the
offense is a felony of the second degree.
SECTION 2.27. Section 466.309(a), Government Code, is
amended to read as follows:
(a) A person commits an offense if the person intentionally
or knowingly tampers with, damages, defaces, or renders inoperable
any vending machine, electronic computer terminal, video lottery
terminal or other video lottery equipment, or other mechanical
device used in a lottery game.
SECTION 2.28. The heading to Section 466.317, Government
Code, is amended to read as follows:
Sec. 466.317. PROHIBITION AGAINST SALE OF CERTAIN LOTTERY
TICKETS OR OPERATION OF CERTAIN VIDEO LOTTERY SYSTEMS.
SECTION 2.29. Section 466.317, Government Code, is amended
by adding Subsection (a-1) and amending Subsections (b) and (c) to
read as follows:
(a-1) A person may not control or operate a video lottery
system in this state except as provided by this chapter.
(b) The state may enter into a compact with another state or
state government [or an Indian tribe or tribal government] to
permit the sale of lottery tickets of this state in the state's[,
tribe's,] or government's jurisdiction and to allow the sale of the
state's[, tribe's,] or government's lottery tickets in this state.
(c) A person commits an offense if the person violates this
section. An offense under this section is a felony of the third
degree [Class A misdemeanor].
SECTION 2.30. Section 466.355(a), Government Code, is
amended to read as follows:
(a) The state lottery account is a special account in the
general revenue fund. The account consists of all revenue received
from the sale of tickets, license and application fees under this
chapter, other than Subchapter K, and all money credited to the
account from any other fund or source under law. Interest earned by
the state lottery account shall be deposited in the unobligated
portion of the general revenue fund.
SECTION 2.31. Subchapter H, Chapter 466, Government Code,
is amended by adding Section 466.360 to read as follows:
Sec. 466.360. VIDEO LOTTERY TERMINAL REVENUE. Revenue
generated from the operation of video lottery terminals is governed
by Subchapter K and commission rules.
SECTION 2.32. Section 466.402, Government Code, is amended
by adding Subsection (e) to read as follows:
(e) This section does not apply to the payment of prizes for
video lottery games governed by Subchapter K.
SECTION 2.33. Chapter 466, Government Code, is amended by
adding Subchapter K to read as follows:
SUBCHAPTER K. VIDEO LOTTERY
Sec. 466.501. LEGISLATIVE FINDINGS AND DECLARATIONS. The
legislature finds and declares the following:
(1) The purpose and intent of this chapter is to carry
out the intent of the voters as established by the approval of
Section 47( ), Article III, Texas Constitution, to expand the
revenue-generating ability of the state lottery by authorizing this
state to operate a video lottery system consistent with public
policy strictly limiting the expansion of gambling in this state.
(2) Except for the operation of video lottery
terminals on certain Indian lands as defined by the Texas
Constitution, the people of this state intend to allow only
state-controlled video lottery games to be conducted in this state
and only in locations at which pari-mutuel wagering is conducted at
racetracks.
(3) This state has the authority and responsibility to
control the proliferation of gambling by:
(A) limiting the total number of video lottery
terminals permitted at authorized locations in this state;
(B) limiting video lottery licensing to specific
licensed racetracks;
(C) extending strict and exclusive state
oversight and supervision to all persons, locations, practices, and
associations related to the operation of video lottery games; and
(D) providing comprehensive law enforcement
supervision of video lottery game activities.
(4) This state's ability to monitor and control the
operation of all video lottery terminals ensures the integrity of
the system and provides for the most efficient oversight and
supervision. Costs incurred for oversight and supervision of
gambling will be significantly less than if video lottery terminals
were not operated as part of the video lottery system. In addition,
providing for the state-controlled system will defend against
criminal infiltration of gambling operations.
(5) The video lottery games operated at racetracks
under this chapter are controlled by this state in a manner that
allows this state to continuously monitor all video lottery
terminals and to disable any video lottery terminal for the
protection of the public and this state.
(6) Through the video lottery system this state will
monitor the network of video lottery terminals to ensure maximum
security unique to state-operated gambling. Except as may
otherwise be required by federal law governing Indian lands, each
operating video lottery terminal in this state will be connected to
a video lottery central system.
(7) The authorization for state-controlled video
lottery terminals to fund governmental programs is consistent with
this state's public policy prohibiting gambling provided the
gambling is not, in any way, expanded beyond that directly
controlled by this state. Expanded gambling beyond this limited
form of state-controlled gambling would compromise the public
safety, law, and long-standing policy against gambling in this
state. In addition, such expanded gambling could impose
prohibitive cost on this state's regulatory system and, therefore,
defeat the effort to raise revenue for state governmental programs
through authorized video lottery terminals. For these reasons, any
interpretation that allows for casino gaming of the type operating
in Nevada and New Jersey in 2005 to be conducted in this state at
racetracks or on Indian lands as a result of the authorization of
video lottery terminals would have severe adverse consequences on
this state's efforts to raise revenue to fund governmental programs
through the operation of video lottery terminals and would violate
the public policy against gambling in such a way that would clearly
outweigh any potential positive economic consequences.
(8) In authorizing only a state-controlled and
state-operated video lottery system and state-controlled video
lottery terminals in limited locations and continuing the general
prohibition on gambling in this state as a matter of public policy,
this state is protecting the state's legitimate interests by
restricting such vice activity. By limiting the operation of video
lottery terminals to those connected to the state-controlled video
lottery system and to certain lands and certain types of games, the
legislature seeks to foster this state's legitimate sovereign
interest in regulating the growth of gambling activities in this
state. Historically, this state has banned commercial gambling
altogether and, therefore, it is in this state's best interest to
limit the placement of commercial gambling operations to certain
locations. Limiting video lottery terminals to those controlled by
this state and located on racetracks where regulated gambling
occurs is reasonably designed to defend against the criminal
infiltration of gambling operations and adverse impacts on
communities statewide. By restricting gambling such as video
lottery terminals to carefully limited locations and video lottery
terminals controlled by this state that may be disabled by this
state if necessary to protect the public, this state furthers the
state's purpose of ensuring that such gambling activities are free
from criminal and undesirable elements.
(9) This chapter is game-specific and may not be
construed to allow the operation of any other form of gambling
unless specifically allowed by this chapter. This chapter does not
allow the operation of slot machines, dice games, roulette wheels,
house-banked games, including house-banked card games, or games in
which winners are determined by the outcome of a sports contest that
are expressly prohibited under other state law.
(10) In considering limitations on expanded gambling
in this state, it is a critical factor to effectuate the will of the
voters that any gaming on lands of the Ysleta del Sur Pueblo and
Alabama-Coushatta Indian tribes must be in strict compliance with
state law. The Kickapoo Traditional Tribe of Texas is only entitled
to operate video lottery terminals in strict compliance with state
law, unless otherwise required by federal law, and in accordance
with a gaming agreement negotiated with the governor and ratified
by the legislature. A tribe may not under any circumstances operate
Class III gaming as defined by federal law other than video lottery
terminals connected to a video lottery central system controlled
and operated by this state.
(11) The voters have conferred a substantial economic
benefit on federally recognized Indian tribes by allowing operation
of video lottery terminals on lands held in trust by the Ysleta del
Sur Pueblo and Alabama-Coushatta Indian tribes at the time of the
ratification and approval of Section 47(f), Article III, Texas
Constitution, and on Indian lands of the Kickapoo Traditional Tribe
of Texas on which gaming is allowed under applicable federal law.
These tribes have the exclusive right to operate video lottery
terminals at locations on the Indian lands in this state without
incurring the investment necessary to construct, maintain, and
operate racetracks for live racing, and through revenue-sharing
both the policy of self-governance for the tribes and this state's
interests in generating additional revenue to fund governmental
programs can be promoted.
(12) The public has an interest in video lottery game
operations, and lottery operations conducted under Section 47(f),
Article III, Texas Constitution, and this chapter represent an
exception to the general policy of this state prohibiting wagering
for private gain. Therefore, participation in a video lottery game
by a holder of a license, registration, or approval under this
chapter is considered a privilege conditioned on the proper and
continued qualification of the holder and on the discharge of the
affirmative responsibility of each holder to provide to the
commission or other regulatory and investigatory authorities
established by this chapter any assistance and information
necessary to assure that the policies declared by this chapter are
achieved. Consistent with this policy, the legislature intends
this chapter to:
(A) preclude the creation of any property right
in any license, registration, or approval issued or granted by this
state under this chapter, the accrual of any value to the privilege
of participation in any video lottery game operation, or the
transfer of a license or permit; and
(B) require that participation in video lottery
game operations be solely conditioned on the individual
qualifications of persons seeking this privilege.
(13) Only video lottery terminals lawfully operated in
connection with a video lottery system authorized by this
subchapter may be lawfully operated on Indian lands under the
Johnson Act (15 U.S.C. Section 1175).
Sec. 466.502. CONSTRUCTION; APPLICABILITY OF OTHER
LAWS. (a) This subchapter applies uniformly throughout this
state and all political subdivisions of this state.
(b) To the extent of any inconsistency between Chapter 2003
and this subchapter or a commission rule governing video lottery
terminals, this subchapter or the commission rule controls in all
matters related to video lottery terminals, including hearings
before the State Office of Administrative Hearings.
(c) Video lottery equipment operated under commission
authority and this chapter is exempt from 15 U.S.C. Section 1172.
Sec. 466.505. AUTHORITY TO OPERATE VIDEO LOTTERY SYSTEM.
(a) The commission may implement and operate a video lottery system
and regulate the operation of video lottery terminals at racetracks
in accordance with this chapter and the Texas Racing Act (Article
179e, Vernon's Texas Civil Statutes). This chapter supersedes any
conflicting or inconsistent provision of the Texas Racing Act
(Article 179e, Vernon's Texas Civil Statutes) or other state law.
(b) The commission may allow the operation of video lottery
terminals pursuant to this chapter at locations on Indian lands in
accordance with an effective gaming agreement and in compliance
with applicable federal law.
Sec. 466.506. VIDEO LOTTERY GAMES; STATE OWNERSHIP AND
PROPRIETARY INTEREST. (a) This state owns all video lottery games,
regardless of ownership of the video lottery terminal. This state
possesses a proprietary interest in:
(1) the main logic boards and any electronic storage
medium used in video lottery equipment or games; and
(2) software consisting of computer programs,
documentation, and other related materials necessary for the
operation of the video lottery system.
(b) For purposes of this chapter, this state may acquire a
proprietary interest in video lottery game software through:
(1) ownership of the software; or
(2) an exclusive product license agreement with a
provider in which the provider retains copyrighted ownership of the
software but the license granted to this state is nontransferable
and authorizes this state to operate the software program, solely
for the state's own use, on the video lottery central system and
video lottery terminals connected to the video lottery central
system.
Sec. 466.507. STATE CONTROL OF VIDEO LOTTERY SYSTEM. (a)
In accordance with Section 47(e), Article III, Texas Constitution,
the commission shall control and regulate the video lottery system
and the video lottery central system through which this state has
the exclusive and unilateral ability to monitor activity of video
lottery terminals and remotely disable video lottery terminals for
the public safety, health, and welfare or the preservation of the
integrity of the lottery and to prevent any financial loss to this
state.
(b) This section does not affect or restrict the ability of
a video lottery manager or video lottery retailer to monitor
activity of video lottery terminals and to disable video lottery
terminals in accordance with commission rules.
(c) The commission may disable a video lottery terminal if a
video lottery retailer's or video lottery manager's license is
revoked, surrendered, or summarily suspended under this subchapter
and to prevent any financial loss to this state.
Sec. 466.510. VIDEO LOTTERY CENTRAL SYSTEM. (a) The
commission shall establish or cause to be established a video
lottery central system to link all video lottery terminals in the
video lottery system. The video lottery central system must
provide the auditing and other information required by the
commission.
(b) The commission shall provide to a registered video
lottery terminal provider or an applicant applying for registration
as a video lottery terminal provider the protocol documentation
data necessary to enable the provider's or applicant's video
lottery terminals to communicate with the commission's video
lottery central system for transmission of auditing program
information and for activation and disabling of video lottery
terminals.
(c) The video lottery central system may not limit or
preclude potential providers from providing the video lottery
terminals, except providers that fail to meet specifications
established by the commission.
(d) The commission shall determine whether a video lottery
central system provider may sell or distribute video lottery
terminals in this state as the commission considers appropriate to
ensure the efficiency, integrity, and security of the video lottery
system.
(e) The commission may contract with a video lottery central
system provider to establish the video lottery central system.
Sec. 466.511. VIDEO LOTTERY TERMINAL PROVIDER:
REGISTRATION OR APPROVAL REQUIRED. (a) A person may not
manufacture or distribute video lottery equipment for use or play
in this state unless the person is registered as a video lottery
terminal provider or is otherwise approved by the commission to
manufacture or distribute video lottery equipment in this state.
(b) Unless suspended or revoked, the registration or
approval expires on the date specified by the commission, which may
not be later than the fifth anniversary of the date of the
registration or approval. A person may renew an unexpired
registration or approval by paying the required renewal fee and
complying with the requirements of this subchapter and commission
rule.
(c) To be eligible for registration or commission approval
as required by this section, an applicant must satisfy all
applicable requirements under this subchapter.
Sec. 466.512. VIDEO LOTTERY TERMINAL PROVIDER: APPLICATION;
CHANGE IN INFORMATION. (a) The commission shall adopt rules
governing the registration or approval of video lottery terminal
providers. The rules must require the application and any other
form or document submitted to the commission by or on behalf of the
applicant to determine the applicant's qualification under this
section to be sworn to or affirmed before an officer qualified to
administer oaths.
(b) An applicant for a video lottery terminal provider
registration or approval must provide the following information:
(1) the full name and address of the applicant;
(2) the full name and address of each location at which
video lottery equipment is or will be manufactured or stored in this
state;
(3) the name, home address, and share of ownership of
the applicant's substantial interest holders;
(4) a full description of each separate type of video
lottery equipment that the applicant seeks to manufacture or
distribute in this state;
(5) the brand name under which each type of video
lottery equipment is to be distributed;
(6) if the applicant is incorporated under law other
than the laws of this state, the applicant's irrevocable
designation of the secretary of state as the applicant's resident
agent for service of process and notice in accordance with the law
of this state;
(7) a list of all businesses or organizations in this
state in which the applicant has any financial interest and the
details of that financial interest, including all arrangements
through which a person directly or indirectly receives any portion
of the profits of the video lottery terminal provider and
indebtedness between the license holder and any other person, other
than a regulated financial institution, in excess of $5,000;
(8) a list of all affiliated businesses or
corporations in which the applicant or an officer, director, or
substantial interest-holder of the applicant, either directly or
indirectly, owns or controls as a sole proprietor or partner more
than 10 percent of the voting stock of a publicly traded
corporation;
(9) a list of all businesses or corporations licensed
to conduct gambling activities or to supply gambling-related
equipment, supplies, or services in which the applicant or an
officer, director, or substantial interest-holder of the applicant
has any interest;
(10) a list of all jurisdictions in which the
applicant or an officer, director, or substantial interest-holder
of the applicant has been licensed, registered, qualified, or
otherwise approved to conduct gambling-related activities during
the 10 years preceding the date of the filing of the application;
(11) a statement, including all related details,
indicating whether the applicant or an officer, director, or
substantial interest-holder of the applicant has ever had a
license, registration, qualification, or other approval for
gambling-related activities denied, revoked, or suspended by any
jurisdiction or has been fined or otherwise required to pay
penalties or monetary forfeitures for gambling-related activities
in any jurisdiction; and
(12) a statement acknowledging that the applicant will
make available for review at the time and place requested by the
commission all records related to the ownership or operation of the
business.
(c) The commission may require the following information
from an applicant:
(1) personal financial and personal history records of
all substantial interest-holders;
(2) all records related to the scope of activity,
including sales of product, purchases of raw materials and parts,
and any contracts, franchises, patent agreements, or similar
contracts or arrangements related to manufacturing or distributing
video lottery terminals; and
(3) records related to any financial or management
control of or by customers and suppliers.
(d) The applicant must demonstrate the ability to comply
with all manufacturing, quality control, and operational
restrictions imposed on authorized video lottery equipment,
patented or otherwise restricted video lottery games, or other
video lottery equipment that the applicant seeks to manufacture or
distribute for use in this state. The registration or approval
process must include an on-site review of the applicant's
manufacturing equipment and process for each separate type of
authorized video lottery equipment to ensure compliance with the
requirements of this chapter and commission rules.
(e) Not later than the 10th day after the date of any change
in the information submitted on or with the application form, the
applicant shall notify the commission of the change, including a
change that occurs after the registration or other commission
approval has been granted.
(f) The applicant shall comply with all federal and state
laws, local ordinances, and rules.
Sec. 466.513. VIDEO LOTTERY TERMINAL PROVIDER: APPLICATION
FEE. (a) An applicant seeking registration or approval or renewal
of registration or approval as a video lottery terminal provider
must pay a nonrefundable application fee in the amount prescribed
by commission rule that is sufficient to pay the costs to the
commission of administering and licensing video lottery terminals.
(b) Application fees paid under this section shall be
retained by the commission to defray costs incurred in the
administration and enforcement of this chapter relating to the
operation of video lottery terminals.
(c) The commission may not issue a video lottery terminal
provider registration or approval to a person that on January 1,
2005, owned any interest in a racetrack or pari-mutuel license in
this state.
Sec. 466.520. VIDEO LOTTERY RETAILER OR VIDEO LOTTERY
MANAGER LICENSE REQUIRED. Except as provided by a gaming
agreement, a person may not own or operate a video lottery terminal
if the person does not satisfy the requirements of this subchapter
and is not licensed by the commission to act as a video lottery
retailer or video lottery manager.
Sec. 466.521. VIDEO LOTTERY RETAILER OR VIDEO LOTTERY
MANAGER: APPLICATION AND QUALIFICATION. (a) An applicant for a
video lottery retailer or video lottery manager license must apply
to the commission under rules adopted by the commission, provide
the information necessary to determine the applicant's eligibility
for a license, and provide other information considered necessary
by the commission. The applicant must:
(1) hold a valid pari-mutuel license granted by the
Texas Racing Commission under the Texas Racing Act (Article 179e,
Vernon's Texas Civil Statutes);
(2) have a valid and executed contract with a
racetrack that satisfies the requirements of Subdivision (1) to act
as a video lottery manager for the racetrack subject to licensing
under this chapter; or
(3) demonstrate to the commission's satisfaction that
the applicant seeks to act as a video lottery manager for a
federally recognized Indian tribe that has entered into a gaming
agreement with this state that is in effect and governs the
regulation of video lottery terminals on Indian lands in this
state.
(b) Each officer, partner, director, key employee,
substantial interest-holder, video lottery game operation
employee, and owner of video lottery game operations must be
eligible and maintain eligibility in accordance with this
subchapter to be involved in video lottery games in this state.
(c) An applicant for a video lottery retailer or video
lottery manager license has the burden of proving qualification for
a license by clear and convincing evidence. In addition to
satisfying minimum requirements established by commission rules,
an applicant for a video lottery retailer or video lottery manager
license must:
(1) be a person of good character, honesty, and
integrity;
(2) be a person whose background and prior activities,
including criminal record, reputation, habits, and associations,
do not pose a threat to the security and integrity of video lottery
or to the public interest of this state or to the effective
operation and control of video lottery, or do not create or enhance
the dangers of unsuitable, unfair, or illegal practices, methods,
and activities in the conduct of video lottery or in the carrying on
of the business and financial arrangements incidental to video
lottery;
(3) if applying for a new license, provide
fingerprints for a criminal records evaluation by the Texas
Department of Public Safety or other law enforcement agency,
including fingerprints for each person required to be named in an
application, accompanied by a signed authorization for the release
of information to the commission by the department of public safety
and the Federal Bureau of Investigation;
(4) not have been convicted of an offense under this
chapter or of any crime related to theft, bribery, or gambling or
involving moral turpitude;
(5) demonstrate adequate business probity,
competence, experience, and financial stability as defined by the
commission;
(6) demonstrate adequate financing for the operation
of the facility at which the video lottery terminals will be
operated from a source that meets the requirements of this
subchapter and is adequate to support the successful performance of
the duties and responsibilities of the license holder and disclose
all financing or refinancing arrangements for the purchase, lease,
or other acquisition of video lottery equipment in the degree of
detail requested by the commission;
(7) when applying for a new license or renewing a
license under this chapter, present evidence to the commission of
the existence and terms of any agreement regarding the proceeds
from the operation of video lottery terminals;
(8) demonstrate that each substantial interest-holder
in the applicant meets all applicable qualifications under this
subchapter;
(9) provide all information, including financial data
and documents, consents, waivers, identification of surety and
insurance providers, and any other materials, requested by the
commission for purposes of determining qualifications for a
license; and
(10) as part of its application, expressly waive any
and all claims against the commission, this state, and a member,
officer, employee, or authorized agent of the commission or this
state for damages resulting from any background investigation,
disclosure, or publication relating to an application for a video
lottery retailer or video lottery manager license.
(d) An application or disclosure form and any other document
submitted to the commission by or on behalf of the applicant for
purposes of determining qualification for a video lottery retailer
or video lottery manager license must be sworn to or affirmed before
an officer qualified to administer oaths.
(e) An applicant who knowingly fails to reveal any fact
material to qualification for a license, finding of suitability, or
other approval or who knowingly submits false or misleading
material information is ineligible for a video lottery retailer or
video lottery manager license.
(f) An applicant for a license or renewal of a license as a
video lottery retailer or video lottery manager shall notify the
commission of any change in the application information for a
license or renewal of a license not later than the 10th day after
the date of the change, except that a publicly traded corporation or
other business association or entity applicant is not required to
notify the commission of a transfer by which any person directly or
indirectly becomes the beneficial owner of less than 10 percent of
the stock of the corporation or association.
(g) Except as provided by Section 466.525(e), the
commission shall deny an application for a license or shall suspend
or revoke a license if the commission finds that the applicant would
be subject to denial or revocation of a sales agent license under
Section 466.155.
Sec. 466.522. VIDEO LOTTERY RETAILER OR VIDEO LOTTERY
MANAGER: APPLICATION FEE. (a) An applicant for a video lottery
retailer or video lottery manager license shall submit a
nonrefundable application processing fee in the amount prescribed
by commission rule that is sufficient and reasonable to pay the
costs of determining the applicant's eligibility, not to exceed
$50,000.
(b) An application may not be processed until the applicant
pays the application fee. If the application fee is not received by
the 30th day after the date the commission notifies the applicant of
the amount of the fee, the application is considered withdrawn and
may not be considered by the commission.
Sec. 466.525. VIDEO LOTTERY TERMINAL ESTABLISHMENT
LICENSE: REQUIREMENTS; LOCATION. (a) An applicant for a video
lottery terminal establishment license must ensure that the
facility for the establishment will comply with all applicable
building codes and rules of the commission. The rules adopted by
the commission relating to facilities for video lottery
establishments must relate solely to this state's interest in the
operation of video lottery terminals.
(b) A video lottery terminal establishment shall provide
office space for the commission sufficient for at least one
commission employee.
(c) An applicant for a video lottery terminal establishment
license or a license holder shall provide the information required
by commission rule relating to the applicant's or license holder's
video lottery terminal establishment and update the information at
least annually.
(d) The commission may not issue a video lottery terminal
establishment license to a racetrack if as of January 1, 2005, a
property line of the licensed premises of the racetrack is located
within one-half mile of the property line of a public school.
(e) Notwithstanding Section 466.155, the commission may not
deny, suspend, or revoke a license under this subchapter based on
the fact that a video lottery terminal establishment or a proposed
video lottery terminal establishment is 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.
Sec. 466.526. LICENSE HOLDER AS SALES AGENT. The holder of
a video lottery retailer or video lottery manager license may
operate as a sales agent for lottery tickets in accordance with this
chapter.
Sec. 466.527. LICENSE TERM; RENEWAL ELIGIBILITY. (a)
Unless suspended or revoked, a license issued under this
subchapter, other than a video lottery retailer license, expires on
the date specified in the license, which may not be later than the
fifth anniversary of the date of issuance.
(b) A video lottery retailer license is valid for the same
term as a pari-mutuel license and until suspended or revoked. The
commission may charge an annual fee not to exceed $50,000 to the
holder of a video lottery retailer license.
(c) To be eligible for renewal of a license, an applicant
must satisfy all applicable licensing requirements under this
subchapter.
Sec. 466.528. RULES FOR ADDITIONAL LICENSE QUALIFICATIONS.
The commission by rule may establish other license qualifications
the commission determines are in the public interest and consistent
with the declared policy of this state.
Sec. 466.529. APPLICATION AS REQUEST FOR CHARACTER
DETERMINATION. An application under this subchapter to receive or
renew a license, registration, or approval or to be found suitable
constitutes a request for a determination of the applicant's
general character, integrity, and ability to participate or engage
in or be associated with the operation of video lottery terminals.
Sec. 466.530. IMMUNITY FOR STATEMENT MADE IN PROCEEDING OR
INVESTIGATION. Any written or oral statement made in the course of
an official commission proceeding or investigative activities
related to an application for commission licensing, registration,
or other approval under this subchapter, by any member or agent or
any witness testifying under oath that is relevant to the purpose of
the proceeding is absolutely privileged and does not impose
liability for defamation or constitute a ground for recovery in any
civil action.
Sec. 466.531. SUITABILITY FINDING. To promote the
integrity and security of the lottery, the commission in its
discretion may require a suitability finding for any person doing
business with or in relation to the operation of video lottery
terminals who is not otherwise required to obtain a license,
registration, or approval from the commission for the person's
video lottery-related operations.
Sec. 466.532. SUMMARY SUSPENSION OF VIDEO LOTTERY RETAILER
OR VIDEO LOTTERY MANAGER LICENSE; TERMINAL DISABLED. (a) The
commission may summarily suspend the license of a video lottery
retailer or video lottery manager without notice or hearing if the
commission finds the action is necessary to maintain the integrity,
security, honesty, or fairness of the operation or administration
of the lottery or to prevent financial loss to this state and:
(1) the license holder fails to deposit money received
from video lottery terminal operations as required by this chapter
or commission rule;
(2) an event occurs that would render the license
holder ineligible for a license under this subchapter;
(3) the license holder refuses to allow the
commission, the commission's agents, or the state auditor, or their
designees, to examine the license holder's books, records, papers,
or other objects under Section 466.017; or
(4) the executive director learns the license holder
failed to disclose information that would, if disclosed, render the
video lottery retailer or video lottery manager ineligible for a
license under this subchapter.
(b) A summary suspension under this section must comply with
the notice and procedure requirements provided by Section 466.160.
(c) The commission may disable a video lottery terminal
operated by a license holder under this subchapter at the time:
(1) a proceeding to summarily suspend the license is
initiated;
(2) the commission discovers the license holder failed
to deposit money received from video lottery terminal operation as
required if the license is being summarily suspended under this
section; or
(3) an act or omission occurs that, under commission
rules, justifies the termination of video lottery terminal
operations to:
(A) protect the integrity of the lottery or the
public health, welfare, or safety; or
(B) prevent financial loss to this state.
(d) The commission shall immediately disable a video
lottery terminal if necessary to protect the public health,
welfare, or safety.
Sec. 466.5321. TRANSFER RESTRICTIONS. (a) A video lottery
retailer or video lottery manager license is not transferable.
(b) A pari-mutuel license holder that sells, transfers,
assigns, or otherwise conveys any interest or control in the
pari-mutuel license or the racetrack owned or managed by the
license holder before video lottery operations begin at the
racetrack or before the third anniversary of the commencement of
video lottery operations shall remit to this state a transfer fee
equal to 75 percent of the sales, transfer, assignment, or other
conveyance price or other consideration received by the pari-mutuel
license holder. A transfer or conveyance of an interest or control
under this subsection is subject to Section 6.21, Texas Racing Act
(Article 179e, Vernon's Texas Civil Statutes).
(c) A sale, transfer, assignment, or conveyance of interest
or control to which Subsection (b) applies may not be approved by
the commission until this state receives the transfer fee.
(d) This section does not apply to a transfer or assignment
the commission determines is necessary to secure financing for the
construction or operation of the racetrack. The commission may
adopt rules to implement this section.
Sec. 466.533. LICENSING, REGISTRATION, SUITABILITY, AND
REGULATORY APPROVAL AS REVOCABLE PERSONAL PRIVILEGES. (a) An
applicant for a license, registration, suitability, or other
affirmative regulatory approval under this subchapter does not have
any right to the license, registration, suitability, or approval
sought.
(b) Any license, registration, or suitability or other
regulatory approval granted under this subchapter is a revocable
privilege, and a holder of the privilege does not acquire any vested
right in or under the privilege.
(c) The courts of this state do not have jurisdiction to
review a decision to deny, limit, or condition the license,
registration, suitability, or approval unless the judicial review
is sought on the ground that the denial, limitation, or condition is
based on a suspect classification, such as race, color, religion,
sex, or national origin, in violation of the Equal Protection
Clause of the Fourteenth Amendment to the United States
Constitution. If a state court has jurisdiction over a claim under
this section, then this state's sovereign immunity is waived only
to the extent expressly provided by Section 466.601.
(d) A license, registration, suitability, or regulatory
approval granted or renewed under this subchapter may not be
transferred or assigned to another person, and a license,
registration, suitability, or approval may not be pledged as
collateral. The purchaser or successor of a person who has been
granted a license, registration, suitability, or regulatory
approval must independently qualify for a license, registration,
suitability, or approval required by this subchapter.
(e) The following acts void the license, registration,
suitability, or other regulatory approval of the holder unless
approved in advance by the commission:
(1) the transfer, sale, or other disposition of an
interest in the holder that results in a change in the identity of a
substantial interest holder; or
(2) the sale of the assets of the holder, other than
assets bought and sold in the ordinary course of business, or any
interest in the assets, to any person not already determined to have
met the applicable qualifications of this subchapter.
Sec. 466.535. CAPITAL INVESTMENTS AND IMPROVEMENT
REQUIREMENTS FOR VIDEO LOTTERY TERMINAL ESTABLISHMENT. A video
lottery retailer or video lottery manager shall provide all
necessary capital investments and required improvements at a video
lottery terminal establishment operated by the retailer or manager.
Sec. 466.536. VIDEO LOTTERY TERMINAL. The commission shall
provide all video lottery retailers or video lottery managers with
a list of registered video lottery terminal providers, video
lottery games, and video lottery terminals authorized for operation
under this subchapter.
Sec. 466.537. VIDEO LOTTERY TERMINAL: DISTRIBUTION AND
COMMISSION APPROVAL. (a) A video lottery terminal provider may not
distribute a video lottery terminal or other video lottery
equipment for placement at a video lottery terminal establishment
in this state unless the video lottery terminal has been approved by
the commission.
(b) Only a video lottery terminal provider registered with
or approved by the commission may apply for approval of a video
lottery terminal or other video lottery equipment.
(c) Not later than the 10th day before the date of shipment
to a location in this state, a video lottery terminal provider shall
file a report with the commission itemizing all video lottery
terminals and other video lottery equipment to be provided to a
video lottery retailer or video lottery manager in the shipment.
Sec. 466.538. VIDEO LOTTERY TERMINAL: TESTING; REPORT. (a)
A video lottery terminal provider shall submit two copies of
terminal illustrations, schematics, block diagrams, circuit
analysis, technical and operation manuals, and any other
information requested by the commission for the purpose of
analyzing and testing the video lottery terminal or other video
lottery equipment.
(b) The commission may require a working model of a video
lottery terminal to be provided to the commission unless the video
lottery terminal provider provides a certification from an
independent, commission-approved testing laboratory that the video
lottery terminal is compatible with the state's video lottery
system and functions as required by the commission.
Sec. 466.539. VIDEO LOTTERY TERMINAL: INSTALLATION;
MODIFICATION REQUEST. (a) A video lottery terminal provider is
responsible for the assembly and installation of all video lottery
terminals and other video lottery equipment.
(b) A video lottery terminal provider or a video lottery
retailer or video lottery manager may not change the assembly or
operational functions of a video lottery terminal authorized by the
commission for placement in this state unless a request for
modification of an existing video lottery terminal prototype is
approved by the commission. The request must contain:
(1) a detailed description of the type of change;
(2) a detailed description of the reasons for the
change; and
(3) technical documentation of the change.
(c) A video lottery terminal approved by the commission for
placement at a video lottery terminal establishment must conform to
the specifications of the video lottery terminal prototype tested
or approved by the commission.
Sec. 466.540. VIDEO LOTTERY TERMINAL REMOVAL. (a) If any
video lottery terminal that has not been approved by the commission
is distributed by a video lottery terminal provider or operated by a
video lottery retailer or video lottery manager or if an approved
video lottery terminal malfunctions, the commission shall require
the terminal to be removed from use and play.
(b) The commission may order that an unapproved terminal be
seized and destroyed.
(c) The commission may suspend or revoke the license of a
video lottery retailer or video lottery manager or the registration
of a video lottery terminal provider for the distribution,
possession, or operation of an unauthorized video lottery terminal.
(d) A video lottery retailer or video lottery manager may
retain on the premises of a video lottery establishment a number of
machines that the retailer or manager determines is necessary for
spare parts or repair purposes or as replacements. The retailer or
manager must provide to the commission each month a list of the
terminals retained under this subsection.
Sec. 466.541. VIDEO LOTTERY TERMINAL SPECIFICATIONS. (a)
The commission shall adopt rules for approval of video lottery
terminals, including requirements for video lottery game tickets,
maximum and minimum payout, and maximum wagers.
(b) A commission-approved video lottery terminal must meet
the following minimum specifications:
(1) the terminal must:
(A) operate through a player's insertion of a
coin, currency, voucher, or token into the video lottery terminal
that causes the video lottery terminal to display credits that
entitle the player to select one or more symbols or numbers or cause
the video lottery terminal to randomly select symbols or numbers;
(B) allow the player to win additional game play
credits, coins, or tokens based on game rules that establish the
random selection of winning combinations of symbols or numbers and
the number of free play credits, coins, or tokens to be awarded for
each winning combination; and
(C) allow the player at any time to clear all game
play credits and receive a video lottery ticket entitling the
player to receive the cash value of those credits;
(2) a surge protector must be installed on the
electrical power supply line to each video lottery terminal, a
battery or equivalent power backup for the electronic meters must
be capable of maintaining the accuracy of all accounting records
and video lottery terminal status reports for a period of 180 days
after power is disconnected from the video lottery terminal, and
the power backup device must be in the compartment specified in
Subdivision (4);
(3) the operation of each video lottery terminal may
not be adversely affected by any static discharge or other
electromagnetic interference;
(4) the main logic boards of all electronic storage
mediums must be located in a separate compartment in the video
lottery terminal that is locked and sealed by the commission;
(5) the instructions for play of each game must be
displayed on the video lottery terminal face or screen, including a
display detailing the credits awarded for the occurrence of each
possible winning combination of numbers or symbols;
(6) communication equipment and devices must be
installed to enable each video lottery terminal to communicate with
the video lottery central system through the use of a
communications protocol provided by the commission to each
registered video lottery terminal provider, which must include
information retrieval and programs to activate and disable the
terminal; and
(7) a video lottery terminal may be operated only if
connected to the video lottery central system, and play on the
terminal may not be conducted unless the terminal is connected to
the video lottery central system.
(c) The commission may reject any instructions for play
required under Subsection (b)(5) that the commission determines to
be incomplete, confusing, or misleading.
Sec. 466.542. VIDEO LOTTERY TERMINALS: HOURS OF OPERATION;
COMMUNICATION; LOCATION. (a) Except as otherwise provided by the
commission, the hours of operation for video lottery terminals are
subject to restrictions only as provided by commission rules.
(b) The commission by rule may prescribe restrictions on the
hours of video lottery terminal operations for purposes determined
by the commission, including accounting for and collecting revenue
generated by video lottery terminal operations and performing other
operational services on the video lottery system.
(c) Communication between the video lottery central system
and each video lottery terminal must be continuous and on a
real-time basis as prescribed by the commission.
(d) Except as provided by a gaming agreement or commission
rule, placement or movement of video lottery terminals in a video
lottery terminal establishment must be consistent with a video
lottery terminal establishment floor plan filed with the
commission.
Sec. 466.543. VIDEO LOTTERY TERMINAL: TRANSPORT;
DISPOSITION OF OBSOLETE TERMINAL. (a) The transportation and
movement of video lottery terminals into or within this state is
prohibited, except as permitted by this subchapter and approved by
the commission.
(b) An obsolete video lottery terminal or a video lottery
terminal that is no longer in operation must be promptly reported to
the commission.
Sec. 466.5455. TRAVEL AND INVESTIGATION COSTS. The
commission shall pay the travel and investigative expenses incurred
under this chapter from money appropriated to the commission.
Sec. 466.546. CONSENT TO COMMISSION DETERMINATION. (a) An
application for a license, registration, finding of suitability, or
other approval under this chapter constitutes a request to the
commission for a decision on the applicant's general suitability,
character, integrity, and ability to participate or engage in or be
associated with the lottery in the manner or position sought.
(b) By filing an application with the commission, the
applicant specifically consents to the commission's decision at the
commission's election when the application, after filing, becomes
moot for any reason other than death.
Sec. 466.547. ABSOLUTE AUTHORITY OF COMMISSION. To protect
the integrity of the lottery or the public health, welfare, or
safety, or to prevent financial loss to this state, the commission
has full and absolute power and authority to:
(1) deny any application or limit, condition,
restrict, revoke, or suspend any license, registration, or finding
of suitability or approval; and
(2) fine any person licensed, registered, found
suitable, or approved for any cause deemed reasonable by the
commission.
Sec. 466.548. WAIVER OF REQUIREMENTS. (a) The commission
may waive, either selectively or by general rule, one or more of the
requirements of Sections 466.512 and 466.521 if the commission
makes a written finding that the waiver is consistent with the
policy of this state, the public health, safety, and welfare, and
the integrity of the lottery.
(b) The commission may waive any requirement under this
chapter for a finding of suitability of an institutional investor
that is a substantial interest holder with respect to the
beneficial ownership of the voting securities of a publicly traded
corporation if the institutional investor holds the securities for
investment purposes only and applies for a waiver in compliance
with Section 466.549 and commission rules.
(c) An institutional investor is not eligible for the
waiver, except as otherwise provided by Subsection (f), if the
institutional investor beneficially owns, directly or indirectly,
more than 15 percent of the voting securities and if any of the
voting securities were acquired other than through a debt
restructuring.
(d) Voting securities acquired before a debt restructuring
and retained after a debt restructuring or as a result of an
exchange, exercise, or conversion after a debt restructuring, or
any securities issued to the institutional investor through a debt
restructuring, are considered to have been acquired through a debt
restructuring.
(e) A waiver granted under Subsection (b) is effective only
as long as the institutional investor's direct or indirect
beneficial ownership interest in the voting securities meets the
limitations set forth in this section, and if the institutional
investor's interest exceeds the limitation at any time, the
investor is subject to the suitability findings required under this
subchapter.
(f) An institutional investor that has been granted a waiver
under Subsection (b) may beneficially own more than 15 percent, but
not more than 19 percent, of the voting securities of a publicly
traded corporation registered with or licensed by the commission
only:
(1) if the additional ownership results from a stock
repurchase program conducted by the publicly traded corporation;
and
(2) on the conditions that:
(A) the institutional investor does not purchase
or otherwise acquire any additional voting securities of the
publicly traded corporation that would result in an increase in the
institutional investor's ownership percentage; and
(B) the institutional investor reduces its
ownership percentage of the publicly traded corporation to 15
percent or less before the first anniversary of the date the
institutional investor receives constructive notice that it
exceeded the 15 percent threshold, based on any public filing by the
corporation with the United States Securities and Exchange
Commission.
(g) The one-year time period under Subsection (f)(2)(B) may
be extended for a reasonable time on commission approval.
(h) An institutional investor may not be considered to hold
voting securities of a publicly traded corporation for investment
purposes only unless the voting securities were acquired and are
held in the ordinary course of business as an institutional
investor and not for the purpose of causing, directly or
indirectly, the election of a majority of the members of the board
of directors, any change in the corporate charter, bylaws,
management, policies, or operations of the corporation registered
with or licensed by the commission or any of its gaming affiliates,
or any other action which the commission finds to be inconsistent
with investment purposes only. The following activities may not be
considered to be inconsistent with holding voting securities for
investment purposes only:
(1) voting, directly or indirectly through the
delivery of a proxy furnished by the board of directors, on all
matters voted on by the holders of the voting securities;
(2) serving as a member of any committee of creditors
or security holders formed in connection with a debt restructuring;
(3) nominating any candidate for election or
appointment to the board of directors in connection with a debt
restructuring;
(4) accepting appointment or election as a member of
the board of directors in connection with a debt restructuring and
serving in that capacity until the conclusion of the member's term;
(5) making financial and other inquiries of management
of the type normally made by securities analysts for information
purposes and not to cause a change in management, policies, or
operations; and
(6) any other activity the commission determines to be
consistent with the investment intent.
(i) For purposes of this section, "debt restructuring"
means:
(1) a proceeding under the United States Bankruptcy
Code; or
(2) any out-of-court reorganization of a person that
is insolvent or generally unable to pay the person's debts as they
become due.
Sec. 466.549. WAIVER APPLICATION REQUIREMENTS. An
application for a waiver under Section 466.548(b) must include:
(1) a description of the institutional investor's
business and a statement as to why the institutional investor meets
the definition of an institutional investor set forth in this
chapter;
(2) a certification, made under oath and penalty of
perjury, that:
(A) states that the voting securities were
acquired and are held for investment purposes only in accordance
with Section 466.548;
(B) provides that the applicant agrees to be
bound by and comply with this chapter and the rules adopted under
this chapter, to be subject to the jurisdiction of the courts of
this state, and to consent to this state as the choice of forum in
the event any dispute, question, or controversy arises regarding
the application or any waiver granted under Section 466.548(b); and
(C) includes a statement by the signatory
explaining the basis of the signatory's authority to sign the
certification and bind the institutional investor to its terms;
(3) a description of all actions, if any, taken or
expected to be taken by the institutional investor related to the
activities described in Section 466.548(f);
(4) the names, addresses, telephone numbers, dates of
birth, and social security numbers of:
(A) the officers and directors of the
institutional investor or the officers' and directors' equivalents;
and
(B) the persons that have direct control over the
institutional investor's holdings of voting securities of the
publicly traded corporation registered with or licensed by the
commission;
(5) the name, address, telephone number, date of
birth, and social security number or federal tax identification
number of each person who has the power to direct or control the
institutional investor's exercise of its voting rights as a holder
of voting securities of the publicly traded corporation registered
with or licensed by the commission;
(6) the name of each person that beneficially owns
more than five percent of the institutional investor's voting
securities or other equivalent;
(7) a list of the institutional investor's affiliates;
(8) a list of all securities of the publicly traded
corporation registered with or licensed by the commission that are
or were beneficially owned by the institutional investor or its
affiliates in the preceding year, including a description of the
securities, the amount of the securities, and the date of
acquisition or sale of the securities;
(9) a list of all regulatory agencies with which the
institutional investor or any affiliate that beneficially owns
voting securities of the publicly traded corporation registered
with or licensed by the commission files periodic reports, and the
name, address, and telephone number of the person, if known, to
contact at each agency regarding the institutional investor;
(10) a disclosure of all criminal or regulatory
sanctions imposed during the preceding 10 years and of any
administrative or court proceedings filed by any regulatory agency
during the preceding five years against the institutional investor,
its affiliates, any current officer or director, or any former
officer or director whose tenure ended within the preceding 12
months, except that for a former officer or director, the
information need be provided only to the extent that it relates to
actions arising out of or during the person's tenure with the
institutional investor or its affiliates;
(11) a copy of the institutional investor's most
recent Schedule 13D or 13G and any amendments to that schedule filed
with the United States Securities and Exchange Commission
concerning any voting securities of the publicly traded corporation
registered with or licensed by the commission;
(12) a copy of any filing made under the Securities
Exchange Act of 1934 (15 U.S.C. Section 78a et seq.) with respect to
the acquisition or proposed acquisition of voting securities of the
publicly traded corporation registered with or licensed by the
commission; and
(13) any additional information the commission may
request.
Sec. 466.550. CHANGE IN INVESTMENT FOLLOWING WAIVER;
NOTICE. (a) An institutional investor that has been granted a
waiver of a finding of suitability under Section 466.548 and that
subsequently intends not to hold the investor's voting securities
of the publicly traded corporation for investment purposes only or
that intends to take any action inconsistent with the investor's
prior intent shall, not later than the second business day after the
date of the decision, deliver notice to the commission in writing of
the change in the investor's investment intent. The commission may
then take any action the commission deems appropriate.
(b) If the commission finds that an institutional investor
has failed to comply with this chapter or should be subject to a
finding of suitability to protect the public interest, the
commission may require the institutional investor to apply for a
finding of suitability.
(c) Any publicly traded corporation registered with or
licensed by the commission shall immediately notify the commission
of any information about, fact concerning, or actions of an
institutional investor holding any of its voting securities that
may materially affect the institutional investor's eligibility to
hold a waiver under Section 466.548.
Sec. 466.551. EFFECT OF DENIAL OF LICENSE OR REGISTRATION.
(a) A person whose application for a license or registration has
been denied may not have any interest in or association with a video
lottery retailer or video lottery manager or any other business
conducted in connection with video lottery without prior approval
of the commission.
(b) Any contract between a person holding a license or
registration and a person denied a license or registration must be
terminated immediately on receipt of notice from the commission.
If the person denied a license or registration has previously been
granted a temporary license or registration, the temporary license
or registration expires immediately on denial of the permanent
license or registration.
(c) Except as otherwise authorized by the commission, a
person denied a license or registration may not reapply for any
license or registration before the second anniversary of the date
of the denial.
Sec. 466.553. PRACTICE BY VIDEO LOTTERY RETAILER OR VIDEO
LOTTERY MANAGER. A video lottery retailer or video lottery manager
must:
(1) be aware of patron conditions and prohibit play by
visibly intoxicated patrons;
(2) comply with state alcoholic beverage control laws;
(3) at all times maintain sufficient change and cash
in denominations accepted by video lottery terminals;
(4) promptly report all video lottery terminal
malfunctions and down-time;
(5) install, post, and display prominently any
material required by the commission;
(6) prohibit illegal gambling and any related
paraphernalia;
(7) except as otherwise provided by this subchapter,
at all times prohibit money lending or other extensions of credit at
the video lottery terminal establishment;
(8) supervise employees and activities to ensure
compliance with all commission rules and this chapter;
(9) maintain continuous camera coverage of all aspects
of video lottery game operations, including video lottery
terminals; and
(10) maintain an entry log for each video lottery
terminal on the premises of the video lottery terminal
establishment and maintain and submit complete records on receipt
of each video lottery terminal on the premises as determined by the
commission.
Sec. 466.554. RACETRACK REQUIREMENTS. (a) A video lottery
retailer at all times must hold a valid pari-mutuel wagering
license, except that the commission may allow a video lottery
retailer whose pari-mutuel wagering license has lapsed or been
revoked, suspended, or surrendered to reapply for a license in
order to operate the video lottery terminal establishment or by
rule may establish a period not to exceed two years during which
time the video lottery terminal establishment may be operated
pending acquisition by a person qualified and licensed under this
chapter to operate video lottery terminals.
(b) If a video lottery retailer is not licensed as required
by Subsection (a) before the second anniversary of the date a
license lapses or is revoked, suspended, or surrendered or a new
video lottery manager or video lottery retailer is not licensed and
authorized to operate the facility before the second anniversary,
the pari-mutuel license holder shall permanently lose eligibility
under this subchapter to operate video lottery terminals.
(c) Subject to the commission's discretion, a video lottery
retailer may continue to operate the video lottery terminal
establishment after the second anniversary of the date a license
lapses or is revoked, suspended, or surrendered only to satisfy the
establishment's existing outstanding debt attributable to video
lottery operation.
Sec. 466.556. PRIZE RULES. The commission shall adopt
rules governing:
(1) the range of amounts a player may be charged to
play each video lottery game; and
(2) the range of prizes and credits that may be awarded
to the player of a video lottery game.
Sec. 466.557. VIDEO LOTTERY CENTRAL SYSTEM: COMMUNICATION
TECHNOLOGY. The video lottery central system provider shall pay
for the installation and operation of commission-approved
communication technology to provide real-time communication
between each video lottery terminal and the video lottery central
system.
Sec. 466.558. RESPONSIBILITY FOR VIDEO LOTTERY GAME
OPERATIONS. (a) A video lottery retailer or a video lottery
manager, if applicable, is responsible for the management of video
lottery game operations, including:
(1) the validation and payment of prizes; and
(2) the management of cashiers, food and beverage
workers, floor workers, security personnel, the security system,
building completion, janitorial services, landscaping design, and
maintenance.
(b) Nothing in Subsection (a) limits the authority of the
commission, the Department of Public Safety, or another law
enforcement agency to administer and enforce this chapter as
related to video lottery.
(c) In addition to other requirements under this chapter
relating to video lottery, a video lottery retailer or a video
lottery manager at all times shall:
(1) operate only video lottery terminals that are
distributed by a registered video lottery terminal provider and
provide a secure location for the placement, operation, and play of
the video lottery terminals;
(2) prevent any person from tampering with or
interfering with the operation of a video lottery terminal;
(3) ensure that communication technology from the
video lottery central system to the video lottery terminals is
connected at all times and prevent any person from tampering or
interfering with the operation of the connection;
(4) ensure that video lottery terminals are in the
sight and control of designated employees of the video lottery
retailer or video lottery manager and in the sight of video cameras
as required under this subchapter;
(5) ensure that video lottery terminals are placed and
remain placed in the locations in the video lottery terminal
establishment that are consistent with the retailer's or manager's
floor plan;
(6) monitor video lottery terminals to prevent access
to or play by persons who are under 21 years of age or who are
visibly intoxicated;
(7) refuse to accept a credit card payment from a
player for the exchange or purchase of video lottery game credits or
for an advance of coins, currency, vouchers, or tokens to be used by
a player to play video lottery games, refuse to extend credit, in
any manner, to a player that enables the player to play a video
lottery game, and ensure that any person doing business at the video
lottery terminal establishment, including a person operating or
managing an auxiliary service such as a restaurant, refuses to
accept a credit card payment or to extend credit to a person to play
a video lottery game in a manner prohibited by this subdivision,
except that:
(A) a license holder may cash a check for a player
if the license holder exercises reasonable caution cashing the
check and does not cash checks for any player in an amount not to
exceed $1,000 in any 24-hour period; and
(B) automated teller machines may be located at a
video lottery terminal establishment in compliance with the Texas
Racing Act (Article 179e, Vernon's Texas Civil Statutes) or an
effective gaming agreement;
(8) pay all credits won by a player on presentment of a
valid winning video lottery game ticket;
(9) conduct only the video lottery game advertising
and promotional activities consistent with criteria prescribed by
the commission, which must prohibit undue influence, offensive
language, and anything that would affect the integrity of video
lottery operation;
(10) install, post, and display prominently at the
licensed location redemption information and other informational
or promotional materials as required by the commission;
(11) maintain general liability insurance coverage
for the video lottery terminal establishment and all video lottery
terminals in the amounts required by the commission;
(12) assume liability for money lost or stolen from
any video lottery terminal; and
(13) annually submit an audited financial statement to
the commission in accordance with generally accepted accounting
principles.
Sec. 466.560. TECHNICAL STANDARDS FOR VIDEO LOTTERY
EQUIPMENT. The commission by rule shall establish minimum
technical standards for video lottery equipment that may be
operated in this state.
Sec. 466.561. INCIDENT REPORTS. (a) A video lottery
retailer or video lottery manager shall record all unusual
occurrences related to gaming activity in a video lottery terminal
establishment operated by the retailer or manager.
(b) A video lottery retailer or video lottery manager shall
assign each material incident, without regard to materiality, a
sequential number and, at a minimum, provide the following
information in a permanent record prepared in accordance with
commission rules to ensure the integrity of the record:
(1) the number assigned to the incident;
(2) the date and time of the incident;
(3) the nature of the incident;
(4) each person involved in the incident; and
(5) the name of the employee or other agent of the
video lottery retailer or video lottery manager who investigated
the incident.
Sec. 466.562. EXCLUSION OF PERSONS. (a) The commission
shall compile a list of persons that a video lottery retailer or
video lottery manager must bar from a video lottery terminal
establishment based on a person's criminal history or association
with criminal offenders or because the person poses a threat to the
integrity of the lottery.
(b) A video lottery retailer or video lottery manager shall
employ the retailer's or manager's best efforts to exclude such
persons from entry into the establishment.
(c) A video lottery retailer or video lottery manager may
exclude a person for any reason not related to the person's race,
sex, national origin, physical disability, or religion.
(d) A person who believes the person may be playing video
lottery games on a compulsive basis may request that the person's
name be placed on the list compiled by the commission under
Subsection (a).
(e) All video lottery game employees shall receive training
in identifying players with a compulsive playing problem. Signs
and other materials shall be readily available to direct compulsive
players to agencies that offer appropriate counseling.
Sec. 466.563. REPORT ON LITIGATION. (a) A video lottery
retailer or video lottery manager shall report to the commission
any litigation relating to the retailer's or manager's video
lottery terminal establishment, including a criminal proceeding, a
proceeding involving an issue related to racing activities that
impact video lottery operations, or a matter related to character
or reputation relevant to a person's suitability under this
subchapter.
(b) The report required under Subsection (a) must be filed
not later than the fifth day after acquiring knowledge of the
litigation.
Sec. 466.564. COMMISSION APPROVAL REQUIRED FOR PROCEDURES
AND ADMINISTRATIVE AND ACCOUNTING CONTROLS. (a) The commission's
approval is required for all internal procedures and administrative
and accounting controls of a video lottery retailer or video
lottery manager.
(b) The commission by rule shall establish general
accounting and auditing requirements and internal control
standards for video lottery retailers and video lottery managers.
Sec. 466.566. VIDEO LOTTERY TERMINAL EVENTS. A video
lottery retailer or video lottery manager shall keep a database of
video lottery terminal events. The commission by rule shall
determine what constitutes a video lottery terminal event for
purposes of this section.
Sec. 466.567. EMPLOYEE REPORTING. (a) On or before the
15th day of each month, a video lottery retailer or video lottery
manager shall submit to the commission an employee report for the
video lottery terminal establishment operated by the retailer or
manager. For each employee of the retailer or manager, the report
must provide the employee's name, job title, date of birth, and
social security number.
(b) The employee report is confidential and may not be
disclosed except under commission order or in accordance with
Section 466.022(d).
(c) The commission may conduct criminal history
investigations for employees of video lottery retailers and video
lottery managers.
(d) The commission may prohibit an employee from performing
any act relating to video lottery terminals if the commission finds
that an employee has:
(1) committed, attempted, or conspired to commit any
act prohibited by this chapter;
(2) concealed or refused to disclose any material fact
in any commission investigation;
(3) committed, attempted, or conspired to commit
larceny or embezzlement;
(4) been convicted in any jurisdiction of an offense
involving or relating to gambling;
(5) accepted employment in a position for which
commission approval is required after commission approval was
denied for a reason involving personal unsuitability or after
failing to apply for a license or approval on commission request;
(6) been prohibited under color of governmental
authority from being present on the premises of any gaming
establishment or any establishment where pari-mutuel wagering is
conducted for any reason relating to improper gambling activity or
for any illegal act;
(7) wilfully defied any legislative investigative
committee or other officially constituted body acting on behalf of
the United States or any state, county, or municipality that sought
to investigate alleged or potential crimes relating to gaming,
corruption of public officials, or any organized criminal
activities; or
(8) been convicted of any felony or any crime
involving moral turpitude.
(e) The commission may prohibit an employee from performing
any act relating to video lottery terminals based on a revocation or
suspension of any gaming or wagering license, permit, or approval
or for any other reason the commission finds appropriate, including
a refusal by a regulatory authority to issue a license, permit, or
other approval for the employee to engage in or be involved with the
lottery or with regulated gaming or pari-mutuel wagering in any
jurisdiction.
(f) In this section, "employee" includes any person
connected directly with or compensated by an applicant or license
holder as an agent, personal representative, consultant, or
independent contractor for activities directly related to video
lottery operations.
Sec. 466.568. REPORT OF VIOLATIONS. A person who holds a
license or registration under this subchapter shall immediately
report a violation or suspected violation of this chapter or a rule
adopted under this chapter by any license or registration holder,
by an employee of a license or registration holder, or by any person
on the premises of a video lottery terminal establishment, whether
or not associated with the license or registration holder.
Sec. 466.569. SECURITY. (a) In addition to the security
provisions applicable under Section 466.020, a video lottery
retailer or video lottery manager shall comply with the following
security procedures:
(1) all video lottery terminals must be continuously
monitored through the use of a closed-circuit television system
that records activity for a continuous 24-hour period and all video
tapes or other media used to store video images shall be retained
for at least 30 days and made available to the commission on
request;
(2) access to video lottery terminal areas shall be
restricted to persons who are at least 21 years of age;
(3) the video lottery retailer or video lottery
manager must submit for commission approval a security plan that
includes a floor plan of the area where video lottery terminals are
to be operated showing video lottery terminal locations and
security camera mount locations; and
(4) each license holder shall employ at least the
minimum number of private security personnel the commission
determines is necessary to provide for safe and approved operation
of the video lottery terminal establishment and the safety and
well-being of the players.
(b) Private security personnel must be present during all
hours of operation at each video lottery terminal establishment.
(c) An agent or employee of the commission or the Department
of Public Safety or other law enforcement personnel may be present
at a video lottery terminal establishment at any time.
(d) The commission may adopt rules to impose additional
surveillance and security requirements related to video lottery
terminal establishments and the operation of video lottery
terminals.
Sec. 466.570. VIDEO LOTTERY TERMINAL ESTABLISHMENT:
COMMISSION RIGHT TO ENTER. The commission, the commission's
representative, the Texas Racing Commission, or a representative of
the Texas Racing Commission, after displaying appropriate
identification and credentials, has the free and unrestricted right
to enter the premises of a video lottery terminal establishment and
to enter any other locations involved in operation or support of
video lottery at all times to examine the systems and to inspect and
copy the records of a video lottery retailer or video lottery
manager pertaining to the operation of video lottery.
Sec. 466.587. INDEMNIFICATION, INSURANCE, AND BONDING
REQUIREMENTS. (a) A license or registration holder shall
indemnify and hold harmless this state, the commission, and all
officers and employees of this state and the commission from any and
all claims which may be asserted against a license or registration
holder, the commission, this state, and the members, officers,
employees, and authorized agents of this state or the commission
arising from the license or registration holder's participation in
the video lottery system authorized under this subchapter.
(b) Surety and insurance required under this subchapter
shall be issued by companies or financial institutions financially
rated "A" or better as rated by A.M. Best Company or other rating
organization designated by the commission and duly licensed,
admitted, and authorized to conduct business in this state, or by
other surety approved by the commission.
(c) The commission shall be named as the obligee in each
required surety and as an additional insured in each required
insurance contract.
(d) A video lottery retailer or video lottery manager may
not be self-insured with regard to video lottery terminal
operations under this section.
(e) The commission by rule shall establish minimum
insurance coverage requirements for a video lottery retailer, video
lottery manager, or video lottery terminal provider.
Sec. 466.588. LIABILITY FOR CREDIT AWARDED OR DENIED;
PLAYER DISPUTE. (a) This state and the commission are not liable
for any video lottery terminal malfunction or error by a video
lottery retailer, video lottery manager, or video lottery terminal
provider that causes credit to be wrongfully awarded or denied to
players.
(b) Any dispute arising between a player and a video lottery
retailer or video lottery manager shall be resolved by the
commission as follows:
(1) if the fair market value of the prize is less than
$1,000, the dispute shall be resolved in accordance with the
commission-approved written policies of the video lottery retailer
or video lottery manager and without any relief available from the
commission or this state; or
(2) if the fair market value of the prize is $1,000 or
more, the dispute shall be resolved by the commission in the
commission's sole discretion in accordance with commission rules.
(c) A court of this state does not have jurisdiction to
review the decision of the commission resolving a dispute between a
player and a video lottery retailer, video lottery manager, or
video lottery terminal provider.
Sec. 466.589. STATE VIDEO LOTTERY ACCOUNT. (a) The
commission shall deposit funds received under this subchapter to
the state video lottery account. The state video lottery account is
a special account in the general revenue fund. The account consists
of all revenue received by this state from the operation of video
lottery terminals.
(a-1) Except as provided by Subsection (b), all revenue
received by this state from the operation of the video lottery
system shall be distributed solely to reimburse the commission
until the $5 million authorized under this subsection is repaid to
the state lottery account. From funds previously appropriated to
the commission for the state fiscal biennium ending August 31,
2007, and notwithstanding Section 466.355(b), the commission is
authorized to expend an amount not to exceed $5 million from the
state lottery account during that biennium to establish the video
lottery system in accordance with this chapter. From revenue
deposited in the state video lottery account during that biennium,
the commission is hereby appropriated the amount necessary to
reimburse the state lottery account for the total amount of funds
expended to establish the video lottery system from the
appropriation to the state lottery account, and the commission
shall deposit that amount to the state lottery account. This
subsection expires January 1, 2009.
(b) Two percent of the net terminal income received by this
state under Section 466.590 shall be allocated to the commission to
defray expenses incurred in administering this chapter related to
video lottery, including expenses incurred to operate the video
lottery central system. All money allocated to the commission
under this subsection may be retained by the commission to defray
expenses of administering this chapter related to video lottery and
shall be deposited in the state video lottery account.
Sec. 466.590. ALLOCATION OF NET TERMINAL INCOME; TRANSFER
OF MONEY. (a) Net terminal income derived from the operation of
video lottery games in this state is allocated as follows:
(1) a portion of the net terminal income generated in
each calendar year shall be remitted to this state by the video
lottery retailer or video lottery manager in an amount equal to 30
percent of the net terminal income for that year; and
(2) the remainder shall be retained by the video
lottery retailer or video lottery manager.
(b) Net terminal income derived from the operation of video
lottery terminals on Indian lands under a gaming agreement
authorized under this subchapter shall be distributed as set forth
in the gaming agreement, provided that the agreement must provide
that this state shall receive no more than 25 percent of the net
terminal income.
(c) One-quarter of one percent of the net terminal income
received by this state under Subsections (a) and (b) shall be
transferred to the Texas Commission on Alcohol and Drug Abuse for
use in the compulsive gambling program under Section 461.018,
Health and Safety Code, if that program is in operation.
(d) One-quarter of one percent of the net terminal income
received by this state under Subsections (a) and (b) shall be
transferred to the Equine Research Program at the College of
Veterinary Medicine at Texas A&M University for use in equine
research under Subchapter F, Chapter 88, Education Code.
(e) The commission shall require a video lottery retailer or
video lottery manager to establish a separate electronic funds
transfer account for depositing money from video lottery terminal
operations, making payments to the commission or its designee, and
receiving payments from the commission or its designee.
(f) A video lottery retailer or video lottery manager may
not make payments to the commission in cash. As authorized by the
commission, a video lottery retailer or video lottery manager may
make payments to the commission by cashier's check.
(g) The commission at least weekly shall transfer this
state's share of net terminal income of a video lottery retailer or
video lottery manager to the commission through the electronic
transfer of the money.
(h) The commission by rule shall establish the procedures
for:
(1) depositing money from video lottery terminal
operations into electronic funds transfer accounts; and
(2) handling money from video lottery terminal
operations.
(i) Unless otherwise directed by the commission, a video
lottery retailer or a video lottery manager shall maintain in its
account this state's share of the net terminal income from the
operation of video lottery terminals, to be electronically
transferred by the commission on dates established by the
commission. On a license holder's failure to maintain this
balance, the commission may disable all of a license holder's video
lottery terminals until full payment of all amounts due is made.
Interest shall accrue on any unpaid balance at a rate consistent
with the amount charged under Section 111.060, Tax Code. The
interest shall begin to accrue on the date payment is due to the
commission.
(j) In the commission's sole discretion, rather than
disable a license holder's video lottery terminals under Subsection
(i), the commission may elect to impose a fine on a license holder
in an amount determined by the commission not to exceed $250,000 for
each violation. If the license holder fails to remedy the
violation, including payment of any amounts assessed by or due to
this state, within 10 days, the commission may disable the license
holder's video lottery terminals or use any other means for
collection as provided by the penalty chart established by the
commission.
(k) A video lottery retailer or video lottery manager is
solely responsible for resolving any income discrepancies between
actual money collected and the net terminal income reported by the
video lottery central system. Unless an accounting discrepancy is
resolved in favor of the video lottery retailer or video lottery
manager, the commission may not make any credit adjustments. Any
accounting discrepancies which cannot otherwise be resolved shall
be resolved in favor of the commission.
(l) A video lottery retailer and video lottery manager shall
remit payment as directed by the commission if the electronic
transfer of money is not operational or the commission notifies the
license holder that other remittance is required. The license
holder shall report this state's share of net terminal income, and
remit the amount generated from the terminals during the reporting
period.
Sec. 466.591. COMMISSION EXAMINATION OF FINANCIAL RECORDS.
The commission may examine all accounts, bank accounts, financial
statements, and records in the possession or control of a person
licensed under this subchapter or in which the license holder has an
interest. The license holder must authorize and direct all third
parties in possession or in control of the accounts or records to
allow examination of any of those accounts or records by the
commission.
Sec. 466.592. FINANCIAL INFORMATION REQUIRED. (a) A video
lottery retailer or video lottery manager shall furnish to the
commission all information and bank authorizations required to
facilitate the timely transfer of money to the commission.
(b) A video lottery retailer or video lottery manager must
provide the commission advance notice of any proposed account
changes in information and bank authorizations to assure the
uninterrupted electronic transfer of money.
(c) The commission is not responsible for any interruption
or delays in the transfer of money. The video lottery retailer or
video lottery manager is responsible for any interruption or delay
in the transfer of money.
Sec. 466.593. DEDUCTIONS FROM VIDEO LOTTERY PROCEEDS AT
RACETRACKS. (a) Unless otherwise agreed to under Subsection (c) by
the pari-mutuel license holder that owns or operates a horse
racetrack at which video lottery games are conducted under this
subchapter and the officially recognized horsemen's organization
representing the horsemen at the racetrack, the license holder
shall allocate 6.5 percent of the net terminal income generated
from the operation of video lottery terminals at the racetrack to
purses.
(b) Unless otherwise agreed to under Subsection (c) by the
pari-mutuel license holder that owns or operates a greyhound
racetrack at which video lottery games are conducted under this
subchapter and the state breed registry representing the greyhound
breeders at the racetrack, the license holder shall allocate 6.5
percent of the net terminal income generated from the operation of
video lottery terminals at the racetrack to purses.
(c) The pari-mutuel license holder that owns or operates a
racetrack at which video lottery games are conducted under this
subchapter and the officially recognized horsemen's organization
representing the horsemen at the racetrack or the state breed
registry representing the greyhound breeders at the racetrack may
enter into a written agreement to allocate a different percentage
of net terminal income to be used for purses at that racetrack.
(d) A state breed registry may use a portion, not to exceed
10 percent, of the amount allocated for purses under this section
for administration as determined reasonable by the commission.
(e) The commission shall adopt rules to administer this
section. A matter considered by the commission under this section
is a contested case under Chapter 2001, Government Code, and
requires a public hearing.
Sec. 466.595. LIABILITY OF VIDEO LOTTERY RETAILER AND VIDEO
LOTTERY MANAGER. (a) A video lottery retailer, video lottery
manager, or both, are jointly and severally liable to the
commission for the state's share of net terminal income reported by
the video lottery central system.
(b) Net terminal income received by the video lottery
retailer or video lottery manager is held in trust for the benefit
of this state before delivery of the state's share to the commission
or electronic transfer to the state treasury, and the video lottery
retailer or video lottery manager, or both, are jointly and
severally liable to the commission for the full amount of the money
held in trust.
(c) If the video lottery retailer or video lottery manager
is not an individual, each officer, director, or owner of the video
lottery retailer or video lottery manager is personally liable to
the commission for the full amount of the money held in trust,
except that shareholders of a publicly held corporation shall be
liable in an amount not to exceed the value of their equity
investment.
Sec. 466.596. PRIZE PAYMENT AND REDEMPTION. (a) Payment of
prizes is the sole and exclusive responsibility of the video
lottery retailer or video lottery manager. A prize may not be paid
by the commission or this state except as otherwise authorized.
(b) Nothing in this subchapter limits the ability of a video
lottery retailer or video lottery manager to provide promotional
prizes in addition to prize payouts regulated by the commission.
(c) A video lottery ticket must be redeemed not later than
the 180th day following the date of issuance. If a claim is not made
for prize money on or before the 180th day after the date on which
the video lottery ticket was issued, the prize money becomes the
property of the video lottery terminal establishment.
(d) The commission shall enact rules consistent with this
section governing the use and redemption of prizes and credits
recorded on electronic player account records, such as players'
club cards and smart cards.
Sec. 466.597. REVOCATION OF LICENSE, REGISTRATION, OR OTHER
REGULATORY APPROVAL. (a) The commission shall revoke or suspend a
license, registration, or other regulatory approval issued under
this subchapter if the holder of the license, registration, or
approval at any time fails to meet the eligibility requirements set
forth in this subchapter.
(b) Failure to timely remit revenue generated by video
lottery terminals to the commission or any tax or other fee owed to
this state as demonstrated by report from the applicable taxing
authority or to timely file any report or information required
under this subchapter as a condition of any license, registration,
or other approval issued under this subchapter may be grounds for
suspension or revocation, or both, of a license, registration, or
other approval issued under this subchapter.
Sec. 466.598. HEARING FOR REVOCATION OR SUSPENSION OF
REGISTRATION OR LICENSE. (a) Before the commission revokes or
suspends a video lottery terminal provider's registration or video
lottery retailer's or video lottery manager's license, or imposes
monetary penalties for a violation of this subchapter, the
commission shall provide written notification to the license or
registration holder of the revocation, the period of suspension, or
the monetary penalty. The notice shall include:
(1) the effective date of the revocation or the period
of suspension or the amount of the monetary penalty, as applicable;
(2) each reason for the revocation, suspension, or
penalty;
(3) an explanation of the evidence supporting the
reasons;
(4) an opportunity to present the license or
registration holder's position in response on or before the 15th
day after the effective date of the revocation; and
(5) a statement explaining the person's right to an
administrative hearing to determine whether the revocation,
suspension, or penalty is warranted.
(b) The notice required under Subsection (a) must be made by
personal delivery or by mail to the person's mailing address as it
appears on the commission's records.
(c) To obtain an administrative hearing on a suspension,
revocation, or penalty under this section, a person must submit a
written request for a hearing to the commission not later than the
20th day after the date notice is delivered personally or is mailed.
(d) If the commission receives a timely request under
Subsection (c), the commission shall provide the person with an
opportunity for a hearing as soon as practicable. If the commission
does not receive a timely request under Subsection (c), the
commission may impose the penalty, revoke or suspend a license or
registration, or sustain the revocation or suspension without a
hearing.
(e) Except as provided by Subsection (g), the hearing must
be held not earlier than the 11th day after the date the written
request is submitted to the commission.
(f) The commission may provide that a revocation or
suspension takes effect on receipt of notice under Subsection (a)
if the commission finds that the action is necessary to prevent or
remedy a threat to public health, safety, or welfare. The
commission by rule shall establish a nonexclusive list of
violations that present a threat to the public health, safety, or
welfare.
(g) A hearing on a revocation or suspension that takes
effect on receipt of notice must be held not later than the 14th day
after the date the commission receives the request for hearing
under this section. The revocation or suspension continues in
effect until the hearing is completed. If the hearing is continued,
the revocation or suspension shall continue in effect beyond the
14-day period at the request of the license or registration holder
or on a finding of good cause by the commission or administrative
law judge.
(h) To prevail in a post-deprivation administrative hearing
under this section, the license or registration holder must
demonstrate by clear and convincing evidence that the deprivation
or imposition of a penalty was unwarranted or otherwise unlawful.
The post-deprivation hearing may be conducted by the commission or
referred to the State Office of Administrative Hearings.
(i) The administrative record created by the hearing
conducted by the State Office of Administrative Hearings shall be
provided to the commission for review and determination on the
revocation or suspension.
(j) If an administrative law judge of the State Office of
Administrative Hearings conducts a hearing under this section and
the proposal for decision supports the commission's position, the
administrative law judge shall include in the proposal a finding of
the costs, fees, expenses, and reasonable and necessary attorney's
fees this state incurred in bringing the proceeding.
(k) The commission may adopt the findings for costs, fees,
and expenses and make the finding a part of the final order entered
in the proceeding. Proceeds collected from a finding made under
this section shall be paid to the commission.
Sec. 466.599. JUDICIAL REVIEW OF REVOCATION, SUSPENSION, OR
PENALTY IMPOSITION. (a) A person aggrieved by a final decision of
the commission to revoke or suspend a registration or license or to
impose any monetary penalty may obtain judicial review before a
district court in Travis County.
(b) The judicial review must be instituted by serving on the
commission and filing a petition not later than the 20th day after
the effective date of the final decision and must identify the order
appealed from and the grounds or reason why the petitioner contends
the decision of the commission should be reversed or modified.
(c) The review must be conducted by the court sitting
without jury, and must not be a trial de novo but is confined to the
record on review. The reviewing court may only affirm the decision,
remand the case for further proceedings, or reverse the decision if
the substantial rights of the petitioner have been violated.
Sec. 466.600. LICENSE OR REGISTRATION: AGREEMENT TO WAIVE
ENFORCEABILITY. A license or registration holder by virtue of
accepting the license or registration agrees that the privilege of
holding a license or registration under this subchapter is
conditioned on the holder's agreement to Sections 466.597-466.599
and waives any right to challenge or otherwise appeal the
enforceability of those sections.
Sec. 466.601. LIMITED WAIVER OF SOVEREIGN IMMUNITY; NO
LIABILITY OF STATE FOR ENFORCEMENT. (a) This state does not waive
its sovereign immunity by negotiating gaming agreements with Indian
tribes or other persons for the operation of video lottery
terminals or other lottery games under this chapter. An actor or
agent on behalf of this state does not have any authority to waive
the state's sovereign immunity absent an express legislative grant
of the authority. The only waiver of sovereign immunity relative to
video lottery terminal operations is that expressly provided for in
this section.
(b) With regard to video lottery terminal operations on
Indian lands, this state consents to the jurisdiction of the
District Court of the United States with jurisdiction in the county
where the Indian lands are located, or if the federal court lacks
jurisdiction, to the jurisdiction of a district court in Travis
County, solely for the purpose of resolving disputes arising from a
gaming agreement authorized under this subchapter for declaratory
or injunctive relief or contract damages of $100,000 or more. Any
disputes relating to damages or other awards valued at less than
$100,000 shall be arbitrated under the rules of the American
Arbitration Association, provided, however, that application of
the rules may not be construed as a waiver of sovereign immunity.
(c) All financial obligations of the commission are payable
solely out of the income, revenues, and receipts of the commission
and are subject to statutory restrictions and appropriations.
(d) This state and the commission are not liable if
performance by the commission is compromised or terminated by acts
or omissions of the legislature or the state or federal judiciary.
(e) This state and the commission are not liable related to
any enforcement of this chapter.
Sec. 466.602. ABSOLUTE PRIVILEGE OF REQUIRED
COMMUNICATIONS AND DOCUMENTS. (a) Any communication, document, or
record of a video lottery central system provider, video lottery
terminal provider, video lottery retailer, or video lottery
manager, an applicant, or a license or registration holder or
holder of a regulatory approval that is made or transmitted to the
commission or any of its employees to comply with any law, including
a rule of the commission, to comply with a subpoena issued by the
commission, or to assist the commission or its designee in the
performance of their respective duties is absolutely privileged,
does not impose liability for defamation, and is not a ground for
recovery in any civil action.
(b) If a communication, document, or record provided under
Subsection (a) contains any information that is privileged under
state law, that privilege is not waived or lost because the
communication, document, or record is disclosed to the commission
or any of the commission's employees.
(c) The commission shall maintain all privileged
information, communications, documents, and records in a secure
place as determined in the commission's sole discretion that is
accessible only to members of the commission and authorized
commission employees.
Sec. 466.603. INTELLECTUAL PROPERTY RIGHTS OF COMMISSION.
The legislature finds and declares that the commission has the
right to establish ownership of intellectual property rights for
all lottery products, including video lottery terminals and related
video lottery equipment.
Sec. 466.604. MODEL GAMING AGREEMENT. (a) The governor
shall execute, at the governor's discretion as chief executive
officer of this state and on behalf of this state, a gaming
agreement with the Ysleta del Sur Pueblo Indian tribe, the
Alabama-Coushatta Indian tribe, or the Kickapoo Traditional Tribe
of Texas containing the terms set forth in Subsection (b), as a
ministerial act, without preconditions, not later than the 30th day
after the date the governor receives a request from the tribe,
accompanied by or in the form of a duly enacted resolution of the
tribe's governing body, to enter into the gaming agreement.
(b) A gaming agreement executed under Subsection (a) must
contain substantially the terms set forth in a model gaming
agreement adopted by the attorney general and filed with the
secretary of state. The attorney general shall adopt a model gaming
agreement for purposes of this section, consistent with the
applicable provisions of this chapter, and shall file the agreement
with the secretary of state.
(c) An Indian tribe may operate video lottery games and
video lottery terminals in accordance with a gaming agreement
entered into under this section.
(d) The governor may not amend, alter, or otherwise modify
an agreement under this section until after the 10th anniversary of
the date the governor signed the original agreement.
Sec. 466.605. VIDEO LOTTERY GAMES BY INDIAN TRIBES
AUTHORIZED. (a) Notwithstanding any other law, an Indian tribe
may operate video lottery games and video lottery terminals as
authorized by this subchapter pursuant to a compact with the
governor.
(b) To operate video lottery games under this section, an
Indian tribe must be an Indian tribe as listed by the United States
secretary of the interior under 25 U.S.C. Section 479a-1 on or
before January 1, 1998, and must, on or before January 1, 1998, have
had Indian lands within the boundaries of this state. At any time
there may not be more than three Indian tribes operating video
lottery games on Indian lands in this state.
(c) An Indian tribe may operate video lottery games under
this section only on or immediately adjacent to Indian lands placed
into trust by the United States for the benefit of the Indian tribe
on or before January 1, 1998, that were held and occupied by the
Indian tribe on or before January 1, 1998.
(d) A compact or agreement entered into under this section
must contain provisions for the monitoring and auditing of the
operation of video lottery games and any other gaming activity. The
compact must:
(1) provide that the commissioner may inspect all
public and nonpublic areas of the premises where the Indian tribe
operates video lottery games or other gaming activity;
(2) require the conduct of an annual audit by the
commission or an auditor selected by the commission of the Indian
tribe's video lottery game operations; and
(3) provide that the commission may examine and review
all financial records of the Indian tribe's video lottery game
operations at any reasonable time.
(e) An agreement entered into under this section with a
federally recognized Indian tribe, or an affiliated entity, to
allow the tribe or entity to operate video lottery games must
provide that the tribe agrees to collect and remit to the
comptroller all state sales and use taxes for all taxable goods and
services sold on the tribe's Indian lands in this state and all
state taxes on motor fuels, alcoholic beverages, cigarettes and
tobacco products, and hotel occupancy sold on the tribe's Indian
lands. In the case of a federally recognized Indian tribe, the
requirement to collect and remit these state taxes does not apply to
taxes on the sale, use, or consumption of an item by a member of the
tribe. The agreement shall provide a method to secure payment of
these taxes to this state.
(f) The comptroller may adopt rules to ensure that the
exemption from the collection and remission of state taxes under
Subsection (e) applies only to members of the tribe owning that
tribal land.
SECTION 2.34. Section 467.001, Government Code, is amended
by amending Subdivision (9) and adding Subdivision (12) to read as
follows:
(9) "Person that has a significant financial interest
in the lottery" means:
(A) a person or a board member, officer, trustee,
or general partner of a person that manufactures, distributes,
sells, or produces lottery equipment, video lottery equipment,
video lottery games, video lottery central systems, supplies,
services, or advertising;
(B) an employee of a video lottery terminal
provider, video lottery central system provider, or person that
manufactures, distributes, sells, or produces lottery equipment,
supplies, services, or advertising or video lottery equipment or
games and that employee is directly involved in the manufacturing,
distribution, selling, or production of lottery equipment,
supplies, services, or advertising or video lottery equipment or
games;
(C) a person or a board member, officer, trustee,
or general partner of a person that has made a bid to operate the
lottery in the preceding two years or that intends to make a bid to
operate the lottery or an employee of the person if the employee is
directly involved in making the bid; or
(D) a sales agent, video lottery retailer, video
lottery manager, video lottery terminal provider, or video lottery
central system provider.
(12) "Video lottery central system," "video lottery
equipment," "video lottery game," "video lottery manager," "video
lottery retailer," and "video lottery terminal provider" have the
meanings assigned by Section 466.002.
SECTION 2.35. Section 467.027(a), Government Code, is
amended to read as follows:
(a) A commission member is [not] entitled to compensation
for serving on the commission. The annual salary of the commission
members is set by legislative appropriation.
SECTION 2.36. Section 467.031, Government Code, is amended
to read as follows:
Sec. 467.031. DIVISIONS. The commission shall establish
separate divisions to oversee bingo and the state lottery. The
commission may create a division to oversee video lottery and
delegate responsibilities in the administration of Chapter 466 to
the executive director, the director of the appropriate division,
and the division's staff; provided, however, that the commission
may not delegate the following actions:
(1) a final determination in any application or
request for licensing or registration under Chapter 466;
(2) a final determination in any proceeding involving
the suspension or revocation of a registration or license under
Chapter 466;
(3) a final determination that Chapter 466 has been
violated; or
(4) a final determination or imposition of an
assessment of fines or penalties under a law administered by the
commission.
SECTION 2.37. 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, a
video lottery retailer, a video lottery manager, a video lottery
terminal provider, a video lottery central system provider, or a
manufacturer of video lottery games.
SECTION 2.38. Section 467.108, Government Code, is amended
to read as follows:
Sec. 467.108. REPRESENTATION BY FORMER OFFICER OR
EMPLOYEE. (a) A former commission member, former executive
director, or former director may not:
(1) [for compensation,] represent a person, either
with or without compensation, [that has made or intends to make a
bid to operate the lottery] before the commission before the fifth
[second] anniversary of the date that the person's service in
office or employment with the commission ceases;
(2) represent any person or receive compensation for
services rendered on behalf of any person regarding a particular
matter in which the former officer or employee participated during
the period of service or employment with the commission, either
through personal involvement or because the matter was within the
scope of the officer's or employee's official responsibility; or
(3) [for compensation] communicate on behalf of any
person, whether compensated or not compensated, directly with a
member of the legislative branch to influence legislation on behalf
of a person that has any [a significant financial] interest in the
lottery, before the fifth [second] anniversary of the date that the
person's service in office or employment with the commission
ceases.
(b) A person commits an offense if the person violates this
section. An offense under this section is a felony of the third
degree [Class A misdemeanor].
SECTION 2.39. Section 411.108, Government Code, is amended
by adding Subsection (d) to read as follows:
(d) The Texas Lottery Commission may obtain from the
department, subject to an interagency agreement entered into under
Section 466.020(d) or 466.206, criminal history record information
maintained by the department that relates to any natural person,
corporation, association, trust, partnership, limited partnership,
joint venture, government, subsidiary, or other entity, regardless
of its form, structure, or nature that the commission has the
authority to investigate under Chapter 466 as related to the
commission's operation and oversight of video lottery. Criminal
history record information obtained by the commission under this
subsection may be released or disclosed only as provided in
Sections 466.022(d) and 466.206.
SECTION 2.40. Section 47.01(4), Penal Code, is amended to
read as follows:
(4) "Gambling device" means any electronic,
electromechanical, or mechanical contrivance not excluded under
Paragraph (B) that for a consideration affords the player an
opportunity to obtain anything of value, the award of which is
determined solely or partially by chance, even though accompanied
by some skill, whether or not the prize is automatically paid by the
contrivance. The term:
(A) includes, but is not limited to, gambling
device versions of bingo, keno, blackjack, lottery, roulette, video
poker, slot machines, or similar electronic, electromechanical, or
mechanical games, or facsimiles thereof, that operate by chance or
partially so, that as a result of the play or operation of the game
award credits or free games, and that record the number of free
games or credits so awarded and the cancellation or removal of the
free games or credits; and
(B) does not include any electronic,
electromechanical, or mechanical contrivance designed, made, and
adapted solely for bona fide amusement purposes if:
(i) the contrivance rewards the player
exclusively with noncash merchandise prizes, toys, or novelties, or
a representation of value redeemable for those items, that have a
wholesale value available from a single play of the game or device
of not more than 10 times the amount charged to play the game or
device once or $5, whichever is less;
(ii) any merchandise or a representation of
value received by a player may be exchanged only at the same
business and business location at which the contrivance operated by
the player is located and may not be exchanged for a gift
certificate or similar conveyance that is redeemable at another
business or business location; and
(iii) the contrivance or device does not
resemble a slot machine or any other casino game.
SECTION 2.41. Section 47.06(e), Penal Code, is amended to
read as follows:
(e) An offense under this section is a felony of the third
degree [Class A misdemeanor].
SECTION 2.42. Section 47.09, Penal Code, is amended by
adding Subsection (c) to read as follows:
(c) Subsection (a)(3) applies to a person manufacturing,
distributing, possessing, or operating a gambling device with the
authorization of the Texas Lottery Commission under Subchapter K,
Chapter 466, Government Code.
SECTION 2.43. 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 K, Chapter 466, Government Code, for transportation in
interstate or foreign commerce.
SECTION 2.44. Article 6, Texas Racing Act (Article 179e,
Vernon's Texas Civil Statutes), is amended by adding Sections
6.20-6.22 to read as follows:
Sec. 6.20. LIVE RACING REQUIREMENT. (a) The commission by
rule shall require a person who holds a horse racetrack license and
operates a video lottery terminal establishment under Subchapter K,
Chapter 466, Government Code, and that conducted live racing in
2002 to conduct at least the same number of live racing days in each
calendar year after 2005 that the racetrack conducted in 2002.
(b) The commission by rule shall require a person who holds
a greyhound racetrack license and operates a video lottery terminal
establishment under Subchapter K, Chapter 466, Government Code, and
that conducted live racing in 2004 to conduct not less than 420 live
greyhound racing performances in each calendar year after 2005
unless otherwise agreed to by the official state breed registry.
Sec. 6.21. TRANSFER FEE. The commission may not approve the
sale, transfer, assignment, or other conveyance of any interest or
control in a pari-mutuel license or the racetrack owned or managed
by the license holder if the license holder holds a video lottery
retailer license under Subchapter K, Chapter 466, Government Code,
until the transfer fee required by Section 466.5321, Government
Code, is fully paid to this state.
Sec. 6.22. BREED SPLITS AT VIDEO LOTTERY TERMINAL
ESTABLISHMENTS. The commission shall adopt rules to require a
horse racetrack that holds a video lottery retailer license under
Subchapter K, Chapter 466, Government Code, to allocate from the
amount set aside for purses under Section 466.593(a) or (c),
Government Code, 30 percent to quarter horse purses and 70 percent
to thoroughbred purses.