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