The state of the state in Texas gaming didn’t actually change on the ground in 2015, but several issues are at play that could see movement in 2016.

8 Liners
Anyone who lives in or has been to Texas knows that the infamous 8 liner “slot machines” are both illegal and everywhere. Texas law allows the machines as long as the prizes offered are non-cash, worth no more than 10 times the cost to play a single game, and valued at $5 or less. Municipalities pass ordinances allowing them locally, crowing about the revenues they will provide and promising enforcement. But as one area sees the machines shut down, sometimes with the arrests of players, a new town a short distance away will offer the games, “secretly” paying out cash prizes.

The underground industry that has arisen in the face of Texas gambling prohibition is basically unregulated and the money going into and coming out of the machines can be used for nefarious purposes. Expressnews in southern Texas quotes assistant special agent in charge of Homeland Security Investigations in Cameron County, Kevin W. Benson as saying, “When you start seeing a huge cash industry like this with very little accounting, there’s a tremendous amount of flexibility where that money can flow,” the agent said.

Texas Lottery
The Texas Lottery loses millions of dollars each year to the machines but is powerless to stop them. Lawmakers are aware of the $1.58 billion the lottery dumped into state coffers in 2015 – down from $1.89 billion in 2013. Texans gambled more than $4.5 billion on the lottery during the 2015 fiscal year. Strangely enough, in 2013 the Texas House first voted to abolish the lottery and then reversed itself the same day.

Texas is perhaps the most complicated U.S. state to figure out when it comes to the possibility of expanded gambling, especially due to a history that includes Jack Abramoff’s machinations resulting in a single tribal casino in the state, and criminal misdeeds by former GTECH national sales director J. David Smith that prompted a 3,000 man-hour international investigation of the company by the Texas Department of Public Safety’s Criminal Intelligence Service in 2006 – with no eventual finding of criminal wrongdoing, but plenty of interesting information (pdf).

Texas lottery commissioners began looking into ways to boost declining revenues in 2015 and were quickly rebuked by Governor Greg Abbott who told them to stop exploring the possibility of sports betting or daily fantasy sports. In a letter, Abbot wrote, “Please ensure this intent [his support of prohibition] and direction is strictly enforced among the staff of the Texas Lottery Commission,” Abbott wrote. “Please also notify the executive director and staff that any request to travel to gather information about gaming opportunities that are prohibited in Texas should be denied.”

Tribal Gaming
The “Indian question” was recently reignited when the Alabama-Coushatta Tribe and the Tigua Tribes (aka Ysleta Del Sur Pueblo) received a favorable ruling from National Indian Gaming Commission Chairman Jonodev Chaudhuri. On January 12th, William T. Deane and Anne Marie Mackin of the Texas attorney general’s office filed papers to oppose the Tigua Tribe’s request to rescind a 2001 court ordered injunction on gambling, reiterating the office’s previous positions stating that federally recognized law prohibits the tribes from offering even Class II bingo games on their own lands.

INNOVA Gaming Group Inc. (TSX: IGG), announced that, as of January 5, 2016, a subsidiary’s lease with Blue Stone Entertainment LLC had been terminated and that their alternative gaming products, (sweepstakes games) had been removed from the Ysleta del Sur Pueblo’s two entertainment centers in Texas. No procurement of Class II machines has been announced yet.

Horse Racing and Historic Instant Racing Machines
The Texas Racing Commission is at the mercy of legislators who don’t like the fact the commissioners have devised regulations that would allow slot machine like devices at Texas tracks including Retama Park. In September the state fired a warning shot by de-funding the commission, an action that caused a one-day shut down of all tracks. In December legislators gave the commission only enough funding to run through next month. If the racing commission votes again as they did in December, refusing to repeal the racing machine rules, the governor may simply replace members that won’t do his bidding. The Texas Horsemen’s Partnership has sued the Comptroller over the way funding for the commission is administered.

Some of the “historic racing machines” look like slots with spinning reels in addition to video from previous horse races. Gaming is parimutuel, pitting players against each other rather than house odds. Players bet on historic races without the knowledge of important information including the race date, horse or jockey names until the play is over.

Daily Fantasy Sports
Like almost everywhere else there is contention in Texas over whether Daily Fantasy Sports are legal. Unlike New York where  Attorney General Eric Schneiderman went to court with his new-found opinion that DFS are illegal, Texas Attorney General Ken Paxton issued a nonbinding opinion last Tuesday stating among other things, “Odds are favorable that a court would conclude that participation in daily fantasy sports leagues is illegal gambling,” the AG said.

Super Bowl fans shouldn’t worry too much yet though, as none of the major players plan to pull out of the state anytime soon. Texas law does not allow the AG to arbitrarily determine the legality of an activity, rather leaving it to the courts to decide.

An attorney for DraftKings, Randy Mastro said in a statement, “We strongly disagree with the Attorney General’s prediction about what the courts may or may not do if ever presented with the issue of whether daily fantasy sports are legal under Texas law. The Texas Legislature has expressly authorized games of skill, and daily fantasy sports are a game of skill. The Attorney General’s prediction is predicated on a fundamental misunderstanding of DFS. We intend to continue to operate openly and transparently in Texas, so that the millions of Texans who are fantasy sports fans can continue to enjoy the contests they love.”

Casino Cruise Ships
Last year saw the promise of two new casino cruise ships but only one of them has made the grade so far. The Aransas Queen Casino took its maiden voyage in May, while the Pride of Texas is still struggling to find its sea legs.

Known Commodities for 2016
Although change may not come quickly to the Lone Star State, some movement is expected in 2016. For January, in addition to the vilified 8 liners and the lottery’s poor odds, Texans can still jump the border to spend their money out of state at various tribal gaming centers, drive to Eagles Pass and play at the Kickapoo Lucky Eagle, or head over to Aransas Pass for a casino cruise.

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