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A state known for limited government has no gambling!
Background
We’re taking a bit more of a serious policy approach this week, looking at what is going on in Texas. Most think Texas to be a bastion of freedom. A place where Californians go to escape the throes of big government. Of course, whether or not that is true isn’t something we will discuss in this newsletter. The point is that there is a broad conception of Texas as a place with libertarian leanings. Generally, libertarian leanings mean that the government is more permissive of individual freedoms with a lower emphasis on government oversight.
As a result, if one had to guess what state would be on the forefront of legalizing gaming 15 years ago, Texas would not have been a terrible guess. They aren’t big fans of federal regulation (see ERCOT). However, they love sports, hosting an incredible number of professional teams across three different cities (Houston, Dallas, San Antonio), with Austin also having an F1 race and an MLS team. Texas is also a massive market. It is the second-largest state in the U.S. by population and by GDP, or the total economic production in the state.
Of course, the counterargument to all the libertarianism in Texas is that there are still solid Christian mores in Texas that discourages things that people see as flouting conservative values. So for example, marijuana is still illegal in Texas for recreational consumption.
Into the Roots of States Legalize Gambling
The modern gambling era in the early 90s, with the passage of the Professional and Amateur Sports Protection Act (PAPSA), banned sports gambling in most jurisdictions in the United States. The places where sports betting was permitted? They were over the moon. They had a built-in control of the market that could bring in tourist dollars.
State rejection began in New Jersey in 2009 when state senator Raymond Lesniak filed suit against the Constitutionality of PAPSA in District Court. I’ll save the constitutionality arguments for another time and place. Still, the idea’s basic crux is that states should regulate sports gambling. Long story short, it took efforts by both Governor Chris Christie and Governor Phil Murphy to eventually prevail when the Supreme Court finally decided the case in 2018.
Professional sports leagues came out with strength against the New Jerseyan effort to get legalized gambling. Eventually, New Jersey was finally ready to take its first bet in June 2018. Governor Murphy took a $20 wager on the Devils to win the Stanley cup (as a proud Devils fan, that money was as good as burned).
Modern Day States With Sports Gambling
Fast forward a few years, and New Jersey led the charge that many states followed. Lawmakers answered questions about payment options. These questions included the best way to execute mobile gaming, how geolocation would work and all of the other fun logistical challenges that faced operators as they got moving. New Jersey’s launch was a resounding success and inspired other states to move forward, with legalized gambling spreading across the country like wildfire.
There isn’t a particular Red/Blue/Purple state divide. States from Wyoming to Illinois have taken legal bets. Though there is more of a regional divide (which would be fun to explore in another piece), it’s not necessarily political. If we had to make a quick guess on why there is more of a regional divide, legislators got sick of people just jumping across the border to place their bets and cutting into what state legislatures saw as what should have been theirs.
To Texas
So now we move more specifically into Texas. First, Texas has far less pressure from regional states to feel the pinch of losing dollars. Even though no one may ever say it out loud, the analyses that showed how many bets were being placed by New Yorkers inside of New Jersey had to have hurt NY lawmakers and provided a little bit of an extra push. By contrast, Texas’ large cities are deep inside the state, and two of its neighbors (New Mexico and Oklahoma) still have yet to legalize sports betting.
Now, let’s get into the doozy that likely explains why sports gambling hasn’t been legalized in Texas yet: The Texas State Constitution. The Texas Constitution is unlike the United States Constitution in that it is well over 200 pages. When we zoom in, Article III prohibits “lotteries and gift enterprises,” with a few exceptions for stuff like charitable raffles and bingo. Of course, some relevant federal laws still allow Native Americans to operate casinos but states now handle sports betting. Attorneys’ opinions generally indicate that legalizing sports betting is mutually exclusive with this provision in the state Constitution.
This is a pretty clear obstacle to legalizing gambling in the modern-day. So the natural next question is, what does the process for amending the Texas State Constitution look like? Again, we’re looking at a relatively tall yet not impossible task here. The Texas State Constitution is different from the United States Constitution. It has been amended 515 times, including eight last year.
Amending the Constitution In Texas
Amending the Constitution starts with a joint resolution across both of Texas’s legislative chambers. A two-thirds majority of support is required for amending to occur. Assuming this happens, the amendment’s text specifies an election date where citizens then vote on the proposed amendment to the Constitution, which requires a simple majority of support from the population. We’re leaving some details here that are not super pressing, such as the legalese necessary for wording the ballot question and adequate time to spread the word of the amendment in the public square. The amendment election can beat any time with sufficient notice for the administration of the election to take place.
Legislation in Texas
So what’s happened in Texas? There were two significant pushes in 2021. The first was HB2070. The second was a Joint Resolution from both the state senate and house with bi-partisan support. Both wound up dead in the water for the 2021 session. But there were indications of residual backing in the state government.
Texas Governor Greg Abbot has indirectly indicated that he would be open to the possibility of supporting sports betting. But, unfortunately, Lt. Gov Dan Patrick is a bit of a killjoy. He seems to be against legalizing gambling. He is also capable of using his power in the senate to ensure that proposals will be dead in the water.
Even worse, the Texas state legislature only convenes in odd-numbered years. So for sports fans, all of 2022 went to waste because there is no traction on an amendment. It’s hard to know how the tea leaves will fall in 2023. Still, suppose legislators decide they need to amend the Constitution to get gambling legalized. In that case, it almost certainly means that Super Bowl Sunday in 2023 will not have legalized gambling due to the need for an amendment election. At best, it’s a slow and steady trod. We’d guess there will be more mainstream support as other states continue to have success. However, we are still a long way away from gambling in Texas.
Thanks for sticking with us this week. We know this may not have been as sexy or fun as other topics. However, it’s good to deep dive into what’s slowing down sports gambling in some of America’s biggest markets.
