81R11641 YDB-F
By: Gonzalez Toureilles H.B. No. 4062
A BILL TO BE ENTITLED
AN ACT
relating to authorizing the operation of video lottery games by
licensed horse and greyhound racetrack operators, to providing a
defense for the operation of video lottery by Indian tribes, to the
authority of the Texas Lottery Commission and the Texas Racing
Commission, and to the conduct of gambling in this state; providing
penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 466.002, Government Code, is amended by
amending Subdivisions (2) through (10) and adding Subdivisions (11)
through (35) 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 467.031 [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, 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, data storage
devices typically considered alterable but through software or
hardware means have been rendered unalterable, compact disc-read
only memory, flash random access memory, or other technology medium
the commission approves for use in or with a video lottery terminal.
(8) [(4)] "Executive director" means the executive
director of the commission.
(9) "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.
(10) "Indian lands" means land described by Section
47(f), Article III, Texas Constitution.
(11) "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. Section 78c), 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-2);
(iii) an investment company registered
under Section 8, Investment Company Act of 1940 (15 U.S.C. Section
80a-8);
(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.
(12) [(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].
(13) [(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].
(14) [(7)] "Lottery operator" means a person selected
under Section 466.014(b) to operate a lottery game.
(15) "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, means to design, assemble, fabricate,
produce, program, or make modifications to any of those items.
(16) "Net terminal income" means the total amount of
money paid to play video lottery games less the value of all credits
redeemed, 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.
(17) "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).
(18) "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.
(19) [(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.
(20) "Racetrack" means a racetrack as defined by
Section 1.03(25), Texas Racing Act (Article 179e, Vernon's Texas
Civil Statutes).
(21) [(9)] "Sales agent" or "sales agency" means a
person licensed under this chapter to sell tickets.
(22) "Slot machine" means a mechanical, electrical, or
other type of device, contrivance, or machine not connected to the
video lottery central system 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.
(23) "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.
(24) [(10)] "Ticket" means any tangible evidence
issued to provide participation in a lottery game authorized by
this chapter other than a video lottery game.
(25) "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.
(26) "Video lottery central system provider" means a
person that, under a contract with the commission, provides the
video lottery central system.
(27) "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) provide accounting, player tracking,
bonuses, and in-house or wide-area prizes;
(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.
(28) "Video lottery game" means an
electromechanically or 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 typical 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.
(29) "Video lottery manager" means a person who is
licensed by the commission under this chapter to manage a video
lottery terminal establishment.
(30) "Video lottery retailer" means a racetrack or the
operator of the premises of a pari-mutuel license holder at which a
video lottery terminal establishment is located and that holds a
video lottery retailer license under Subchapter K.
(31) "Video lottery system" has the meaning assigned
to that term by Section 47a, Article III, Texas Constitution.
(32) "Video lottery terminal" means an interactive
electronic device that is capable of displaying video lottery
games.
(33) "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.
(34) "Video lottery terminal provider" means a person
in the business of manufacturing or distributing video lottery
terminals in this state.
(35) "Video lottery ticket" means the evidence issued
by a video lottery terminal to reflect a credit balance from the
play of a video lottery game.
SECTION 2. Section 466.003(b), Government Code, is amended
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.
SECTION 3. 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 4. 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 affirmative regulatory 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
affirmative regulatory approval under Subchapter K.
SECTION 5. 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 6. 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 7. 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 8. 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 9. 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, certificate of registration,
or renewal application, a finding of suitability, or any other
affirmative regulatory 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 10. 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 or other
gambling device that is not connected to the video lottery central
system and regulated by this state as required by Section 47a,
Article III, Texas Constitution, and this chapter is prohibited
[machine].
(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 11. 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 12. 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 13. 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 14. 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. 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. As applicable, the commission shall consider information
obtained through a criminal history investigation conducted under
the Texas Racing Act (Article 179e, Vernon's Texas Civil Statutes).
SECTION 15. 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 16. 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 17. 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 or other law, 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.
SECTION 18. 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 19. 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 VIDEO LOTTERY GAME BY
PERSON YOUNGER THAN 21 [YEARS OF AGE].
SECTION 20. Section 466.3051, Government Code, is amended
by adding Subsections (a-1) and (b-1) and amending Subsections (b)
through (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 21. 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 22. 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 23. 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 24. Section 466.317, Government Code, is amended by
adding Subsection (a-1) and amending Subsection (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 or other
law.
(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 25. 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 26. 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 27. 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 28. 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 subchapter is to
carry out the intent of the voters as established by the approval of
Section 47a, 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 as expressly permitted under other law, the
people of this state intend to allow only state-regulated video
lottery games to be conducted in this state and only in locations at
which pari-mutuel wagering is conducted at racetracks.
(3) The video lottery games operated at racetracks
under this subchapter are regulated 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.
(4) Through the video lottery system this state will
monitor the network of video lottery terminals to ensure maximum
security unique to state-regulated gambling. Except as may
otherwise be provided by state or federal law governing gaming on
Indian lands, each operating video lottery terminal in this state
will be connected to a video lottery central system.
(5) Limited gaming is intended to enhance live horse
and greyhound racing, breeding programs, entertainment, and
employment in tourism and agricultural industries of Texas and to
assist this state's horse and greyhound racing industry, support
programs intended to foster and promote horse and greyhound
breeding, and improve the living and working conditions of
personnel who work and reside in and around the stable and backside
areas of racetracks.
(6) In authorizing only a state-regulated and
state-operated video lottery central system and state-regulated
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 activity. By limiting the operation of video
lottery terminals to those connected to the state-regulated video
lottery system on certain land with 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.
(7) This subchapter is game-specific and may not be
construed to allow the operation of any other form of gambling
unless specifically allowed by this subchapter. This subchapter
does not allow the operation of dice games, roulette wheels,
house-banked games, including house-banked card games, or games in
which winners are determined by the outcome of a live sports contest
that are expressly prohibited under other state law.
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.
(c) Video lottery equipment operated under commission
authority and this subchapter is exempt from 15 U.S.C. Section
1172.
Sec. 466.503. CONDUCT RELATED TO OPERATION OF VIDEO LOTTERY
TERMINALS BY INDIAN TRIBES. Notwithstanding any provision of this
chapter, conduct authorized in connection with video lottery
terminals under this subchapter, including conduct in which a
person who holds a license or certificate of registration under
this subchapter is permitted to engage under the license or
registration, is also authorized for the conduct of video lottery
terminals by Indian tribes that is permitted under other law.
[Section 466.504 reserved for expansion]
Sec. 466.505. AUTHORITY TO OPERATE VIDEO LOTTERY SYSTEM.
The commission may implement and operate a video lottery system and
regulate the operation of video lottery terminals at racetracks in
accordance with this subchapter and the Texas Racing Act (Article
179e, Vernon's Texas Civil Statutes). This subchapter supersedes
any conflicting or inconsistent provision of the Texas Racing Act
(Article 179e, Vernon's Texas Civil Statutes) or other state law.
Sec. 466.506. VIDEO LOTTERY GAMES; STATE OWNERSHIP AND
PROPRIETARY INTEREST. For purposes of this subchapter, 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 47a, 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.
[Sections 466.508-466.509 reserved for expansion]
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, security, 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 design may not limit or
preclude potential providers from providing state-of-the-art,
industry-standard video lottery terminals and associated equipment
such as player tracking systems, accounting systems, progressive
systems, and bonusing systems, except for providers that fail to
meet registration or approval specifications established by the
commission.
(d) 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. A
video lottery retailer may also hold a license as a video lottery
terminal provider under this section.
(b) Unless suspended or revoked, the registration or
approval expires on the date specified by the commission, which may
not be later than the 10th 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 and the information an applicant must provide to the
commission. 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) 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.
(c) Not later than the 30th 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.
(d) 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 and may be used only to defray costs
incurred in the administration and enforcement of this chapter
relating to the operation of video lottery terminals.
[Sections 466.514-466.519 reserved for expansion]
Sec. 466.520. VIDEO LOTTERY RETAILER OR VIDEO LOTTERY
MANAGER LICENSE REQUIRED. (a) Except as specifically provided by
other law, 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.
(b) Unless suspended or revoked, a video lottery retailer
license expires on the same date the retailer's racetrack or
pari-mutuel license issued under the Texas Racing Act (Article
179e, Vernon's Texas Civil Statutes) expires.
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:
(1) hold a valid racetrack or 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 subchapter;
(3) demonstrate to the commission's satisfaction that
the applicant seeks to act as a video lottery manager for a
federally recognized Indian tribe; or
(4) have been determined by the Texas Racing
Commission or its designee to be qualified to hold a racetrack or
pari-mutuel license under the Texas Racing Act (Article 179e,
Vernon's Texas Civil Statutes).
(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) The commission shall adopt rules to implement this
section.
(d) The commission shall issue a video lottery retailer or
manager license to an applicant who meets the criteria established
by the commission rules.
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
$5,000.
(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.
[Sections 466.523-466.524 reserved for expansion]
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 a property line of the
licensed premises of the racetrack is located within one-half mile
of the property line of a public school. This subsection does not
apply to a racetrack that was located within one-half mile of a
public school on the first day racing operations commenced at the
racetrack.
(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.
(f) A video lottery terminal establishment may be located
only at the premises of a licensed racetrack.
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. TERM; RENEWAL ELIGIBILITY. (a) Unless
suspended or revoked, a license, certificate of registration,
finding of suitability, or other affirmative regulatory approval
issued under this subchapter, other than a video lottery retailer
license, expires on the date specified in the license, certificate,
finding, or approval, which may not be later than the 10th
anniversary of the date of issuance.
(b) A video lottery retailer license is valid for the same
term as a racetrack or 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, certificate of
registration, finding of suitability, or other affirmative
regulatory approval, an applicant must satisfy all applicable
requirements under this subchapter.
Sec. 466.528. RULES FOR ADDITIONAL QUALIFICATIONS. The
commission by rule may establish other license, certificate,
finding of suitability, or approval 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, certificate of registration, finding of
suitability, or other affirmative regulatory approval 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,
suitability determination, or other affirmative regulatory
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
subchapter 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 operations 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. 466.533. LICENSING, REGISTRATION, SUITABILITY, AND
REGULATORY APPROVAL AS REVOCABLE PERSONAL PRIVILEGES. (a) The
purchaser or successor of a person who holds a license,
registration, finding of suitability, or other affirmative
regulatory approval under this subchapter must independently
qualify for a license, registration, suitability, or approval
required by this subchapter.
(b) The following acts void the license, registration,
finding of suitability, or other affirmative 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.
[Section 466.534 reserved for expansion]
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 related video lottery equipment.
(b) A video lottery terminal provider, 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 or other
representation of credits 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 or from 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.
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 of
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 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.
[Section 466.544 reserved for expansion]
Sec. 466.545. TRAVEL AND INVESTIGATION COSTS. The
commission shall pay the travel and investigative expenses incurred
under this subchapter from money appropriated to the commission.
Sec. 466.546. CONSENT TO COMMISSION DETERMINATION. (a) An
application for a license, certificate of registration, finding of
suitability, or other affirmative regulatory approval under this
subchapter 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, subject to Chapter 2001,
Government Code, to:
(1) deny any application or limit, condition,
restrict, revoke, or suspend any license, registration, finding of
suitability, or other affirmative regulatory approval; and
(2) fine any person licensed, registered, found
suitable, or approved for cause.
Sec. 466.548. INSTITUTIONAL INVESTOR. The commission shall
adopt rules regarding a finding of suitability for an institutional
investor in a person licensed under this subchapter.
[Sections 466.549-466.550 reserved for expansion]
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.
[Section 466.552 reserved for expansion]
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 subchapter;
(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 racetrack or pari-mutuel
wagering license issued by the Texas Racing Commission.
(b) A video lottery retailer that meets the qualifications
of Section 466.521(a)(1) or (4) is considered to meet the
requirements of this section.
[Section 466.555 reserved for expansion]
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 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,
determination of game themes, prizes, bonuses, progressives,
number and placement of video lottery terminals, and individual pay
out percentage settings; 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) pay all credits won by a player on presentment of a
valid winning video lottery game ticket;
(8) install, post, and display prominently at the
licensed location redemption information and other informational
or promotional materials as required by the commission;
(9) maintain general liability insurance coverage for
the video lottery terminal establishment and all video lottery
terminals in the amounts required by the commission;
(10) assume liability for money lost or stolen from
any video lottery terminal; and
(11) annually submit an audited financial statement to
the commission in accordance with generally accepted accounting
principles.
[Section 466.559 reserved for expansion]
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 ACCOUNTING CONTROLS. (a) The commission's approval is
required for all internal procedures 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.
[Section 466.565 reserved for expansion]
Sec. 466.566. VIDEO LOTTERY TERMINAL EVENTS. A video
lottery retailer or video lottery manager shall keep a record 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, certificate of
registration, finding of suitability, or other affirmative
regulatory approval or for any other reason the commission finds
appropriate, including a refusal by a regulatory authority to issue
a license, certificate of registration, finding of suitability, or
other affirmative regulatory 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 in this state.
Sec. 466.568. REPORT OF VIOLATIONS. A person who holds a
license, certificate of registration, finding of suitability, or
other affirmative regulatory approval under this subchapter shall
immediately report a violation or suspected violation of this
chapter or a rule adopted under this chapter by any holder of a
license, certificate of registration, finding of suitability, or
other affirmative regulatory approval, by an employee of the
holder, or by any person on the premises of a video lottery terminal
establishment, whether or not associated with the 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 provide to the commission a security plan for the
retailer or manager's video lottery operations 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.
[Sections 466.571-466.586 reserved for expansion]
Sec. 466.587. INDEMNIFICATION REQUIREMENTS. The holder of
a license, certificate of registration, finding of suitability, or
other affirmative regulatory approval 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 the holder, the commission, this state, and the
members, officers, employees, and authorized agents of this state
or the commission arising from the holder's participation in the
video lottery system authorized under this subchapter.
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,
2011, 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, 2013.
(b) An amount not to exceed one 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 35
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) Ten million dollars of the net terminal income received
by this state under Subsection (a) shall annually in equal monthly
installments be transferred to the Texas Racing Commission to be
expended solely for the treatment of compulsive gamblers and the
promotion of responsible gaming.
(c) One percent of the net terminal income received by this
state under Subsection (a) 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.
(d) Ten million dollars of the net terminal income received
by this state under Subsection (a) shall annually in equal monthly
installments be transferred to the criminal justice planning fund
for use by the criminal justice division of the governor's office to
be used to prosecute offenses under Chapter 47, Penal Code.
(d-1) Three percent of the net terminal income received by
this state under Subsection (a) shall be used to fund the
performance horse development fund, administered by the Texas
Racing Commission to fund a broad spectrum of the horse industry
outside the racing industry and to develop the agriculture industry
in this state. Money from the fund is allocated annually as
follows:
(1) 40 percent of the fund to American Quarter Horse
Association sanctioned events;
(2) 20 percent to National Cutting Horse Association
sanctioned events;
(3) 20 percent to American Paint Horse sanctioned
events; and
(4) 20 percent to the Department of Agriculture to
promote the agricultural industry in this state.
(d-2) The Texas Racing Commission may adopt rules to
administer this section.
(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 30 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) 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 shall enter into a written agreement to allocate a
percentage of net terminal income retained by the license holder to
be used for purses, accredited Texas Bred Incentive programs, and
administrative costs.
(b) Unless otherwise agreed to under Subsection (a) 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 a
percentage determined by the Texas Racing Commission of the net
terminal income generated from the operation of video lottery
terminals at the racetrack to purses. The percentage must be
sufficient to ensure the purses at the racetrack are nationally
competitive and may not be less than 6.5 percent or more than 12
percent of the net terminal income generated from the operation of
terminals at the racetrack.
(c) Unless otherwise agreed to under Subsection (a) 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 a
percentage determined by the Texas Racing Commission of the net
terminal income generated from the operation of video lottery
terminals at the racetrack to purses. The percentage must be
sufficient to ensure the purses at the racetrack are nationally
competitive and may not be less than 6.5 percent or more than 12
percent of the net terminal income generated from the operation of
terminals at the racetrack.
(d) The Texas Racing 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.
(e) The state breed registry may allocate up to 50 percent
of the amount received under Subsection (c) for Texas breeder
awards.
[Section 466.594 reserved for expansion]
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.
(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,
SUITABILITY FINDING, OR OTHER REGULATORY APPROVAL. (a) The
commission shall revoke or suspend a license, certificate of
registration, finding of suitability, or other affirmative
regulatory approval issued under this subchapter if the holder 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, certificate of
registration, finding of suitability, or other affirmative
regulatory approval issued under this subchapter may be grounds for
suspension or revocation, or both, of a license, registration,
suitability, or approval issued under this subchapter.
Sec. 466.598. HEARING FOR REVOCATION OR SUSPENSION. (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 certificate of 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 commission shall adopt rules to implement this
section.
[Sections 466.599-466.600 reserved for expansion]
Sec. 466.601. 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 holder of a license, certificate of
registration, finding of suitability, or other affirmative
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. 466.602. 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.
SECTION 29. 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 30. Section 467.031, Government Code, is amended to
read as follows:
Sec. 467.031. DIVISIONS; DIRECTOR; CONTRACT. The
commission shall establish separate divisions to oversee bingo and
the state lottery. The commission shall employ a director to
oversee video lottery and shall enter into an intra-agency
agreement with the Texas Racing Commission for the Texas Racing
Commission to be responsible for performing the inspections and
regulatory functions specified in the agreement at racetracks on
behalf of the Texas Lottery Commission.
SECTION 31. 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 32. 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 33. 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 34. 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 35. 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 36. Section 47.09, Penal Code, is amended by
amending Subsection (a) and adding Subsection (c) 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; or
(C) the Texas Racing Act (Article 179e, Vernon's
Texas Civil Statutes);
(2) consisted entirely of participation in gambling or
other gaming activity that:
(A) is or may be permitted under the Indian
Gaming Regulatory Act (18 U.S.C. Section 1166 et seq. and 25 U.S.C.
Section 2701 et seq.), without regard to whether the gambling or
gaming activity is conducted by an Indian tribe to which that Act
applies; and
(B) is conducted:
(i) by an Indian tribe or tribal
organization that was included on the January 30, 1998, list of
recognized Indian tribes by the United States secretary of the
interior as required under 25 U.S.C. Section 479a-1; and
(ii) on premises designated by the tribe or
tribal organization for that gambling or other gaming activity on
land that was held in trust or recognized as tribal land of that
tribe or tribal organization by the federal government on January
1, 1998;
(3) was a necessary incident to activity described by
Subdivision (2);
(4) consisted entirely of participation in the state
lottery, including the video lottery system, authorized by Chapter
466, Government Code; or
(5) [(3)] was a necessary incident to the operation of
the state lottery, including the video lottery system, 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.
(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 37. 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, or on behalf of an
Indian tribe in connection with activity described by Section
47.09(a)(2) for transportation in interstate or foreign commerce.
SECTION 38. (a) As soon as practicable after the
constitutional amendment to authorize video lottery games by
licensed racetrack operators proposed by the 81st Legislature,
Regular Session, 2009, is approved by the voters and becomes
effective, the Texas Lottery Commission and the Texas Racing
Commission shall adopt the rules necessary to implement video
lottery in accordance with Subchapter K, Chapter 466, Government
Code, as added by this Act.
(b) Before the proposed constitutional amendment is
submitted to the voters, the Texas Lottery Commission may expend
money from the commission's appropriation for the 2010-2011 state
fiscal biennium for purposes of conducting pre-implementation
activities to establish the state video lottery system in
accordance with Subchapter K, Chapter 466, Government Code, as
added by this Act. Notwithstanding Section 466.355, Government
Code, the money authorized to be expended under this section may be
withdrawn from the state lottery account and considered a part of
the transfer of funds from the state lottery account authorized
under Section 466.589, Government Code, as added by this Act, to
fund the establishment of the state video lottery system.
SECTION 39. The change in law made by this Act applies only
to an offense committed on or after the effective date of this Act.
An offense committed before the effective date of this Act is
covered by the law in effect when the offense was committed, and the
former law is continued in effect for that purpose. For purposes of
this section, an offense was committed before the effective date of
this Act if any element of the offense was committed before that
date.
SECTION 40. Sections 1 through 37 and 39 of this Act take
effect on the date the constitutional amendment authorizing a video
lottery system to operate video lottery games at certain horse and
greyhound racetracks and providing that federally recognized
Indian tribes are not prohibited from conducting gaming on certain
Indian lands proposed by the 81st Legislature, Regular Session,
2009, becomes effective. Section 38 of this Act and this section
take effect immediately if this Act receives a vote of two-thirds of
all the members elected to each house, as provided by Section 39,
Article III, Texas Constitution. If this Act does not receive the
vote necessary for immediate effect, Section 38 of this Act and this
section take effect September 1, 2009.