Texas Considering ADW and "Purpose-Driven" Gaming

Legalizing advanced deposit wagering and reconsidering the adoption of historical racing are among five bills filed with the Texas Legislature that would benefit the state's Thoroughbred racing industry.

The bills permitting ADW and historical racing games—recast as purpose-driven pari-mutuel wagering—were filed by Rep. John Kuempel, a Republican from Seguin, who is chairman of the House Licensing and Administrative Procedures Committee and a longtime supporter of the racing industry.

HB 3925 would authorize account wagering, making it legal for Texas residents to wager on races in and outside Texas through various online vendors. For years, the Lone Star State has struggled to compete with racing in surrounding states that have not only allowed ADW for many years but also allow casino gambling.

"This bill has the potential to provide sustenance," said Mike Lavigne, a Texas racing industry spokesman on political issues. "It won't put us on par with Oklahoma or Louisiana with average daily purses, but it keeps us in the game."

Estimates were not available yet about the economic impact of ADW, but Texas Thoroughbred Association executive director Mary Ruyle expects the flow of new money to purses to be significant.

"There are a lot of details to work out regarding fees, and you want to be sure you have something that works for the tracks and the horsemen," she said. "It has the potential to bring in a lot of money."

A year removed from a highly contentious debate over historical racing that nearly forced a shutdown of the Texas Racing Commission, the electronic games that use the results of previously run races to determine the outcome are back as "purpose-driven pari-mutuel wagering." 

The primary purpose behind allowing the electronic pari-mutuel wagering game, as proposed in HB 3926, is to fund the purchase of enhanced bulletproof vests and body armor for law enforcement officers throughout the state. Upgrading this equipment is a priority for the Legislature and will cost an estimated $25 million, according to the Texas Commission on Law Enforcement, but the state is also facing a $5-6 billion budget shortfall.

The purpose-driven pari-mutuel bill also would allow other 501(c)(3) charities to participate.

"There were some not comfortable with the name 'historical racing,' that it implied something outdated," said Ruyle. "The concept of purpose-driven pari-mutuel wagering is really more descriptive of what it is. There is a specific amount going to law enforcement with an opportunity for charities to rotate in and out."

Ruyle said it has been discussed that players would be allowed to select one or more charities they want to support as they play. Also the racetracks or other licensed pari-mutuel facilities that will offer the electronic games (10 facilities will be licensed) could have their machines support local charities.

Racetracks would get a cut of the electronic gaming revenue as part of a still-to-be determined takeout for handling the pari-mutuel wagers.

Mitchell: Texas Commission Repeals Historical Racing

The reason historical racing games got sidetracked in 2016 was a feud between the Texas Racing Commission, which had adopted rules to implement the games, and legislative leaders who saw the commission acting outside its authority to expand gambling. Under a threat of losing its funding, the commission voted to repeal its rules Feb. 18, 2016. After the vote, Lt. Gov. Dan Patrick said he looked forward to working with the Thoroughbred racing community to find other ways to help the industry be competitive with its racing neighbors.

"We heard their suggestion loud and clear that we move things through the Legislature and not the commission, so here we are," said Lavigne.

Both the ADW and the purpose-driven gaming bills are being considered at the same time Texas legislators will be considering three House bills that would definitively legalize participation in daily fantasy sports games. In light of the changing landscape of fantasy sports, ADW will look like a particularly safe bet for lawmakers, according to Lavigne.

"There are no questions about how ADW works and whether it works and if it is safe," said Lavigne. "All those questions have been answered. Twenty-six other states have adopted it and there are protocols in place to protect consumers. That makes it more attractive to legislators who are dealing with questions about fantasy sports and what it is really."

Three other bills filed with the Texas Senate by Sen. Lois Kolkhorst, a Republican from Brenham, are also being strongly supported by the Thoroughbred racing community.

SB 1971 would create a matching fund for purses from the state's general revenue fund that is projected to increase purses by $25 million. The revenue source is a piece of the sales taxes paid on feed, supplements, and tack. This bill has been co-sponsored by Sen. Dawn Buckingham, a Republican from Lakeway.

SB 1972 would shift accredited Texas-bred incentive funds from the Texas Racing Commission's budget and into an escrow account. What this shift would accomplish is to shelter the incentive funds from future budget cuts the commission might face.

SB 1973 would use existing state tax revenue from simulcast wagers that are currently going into the Texas general fund and redirect it toward helping pay the Texas Racing Commission's operating costs. As it is today, all the commission operating expenses are paid for the racing industry through racetrack and occupational license fees.

"All these bills recognize the importance of the racing and breeding industry in this state," said Ruyle. "We encourage all horsemen to voice their support for these bills."