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Texas House Bill HB3980

Texas 2025 - 89th Regular

Texas House Bill HB3980 Compare Versions

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11 89R4049 BEE-F
22 By: Patterson H.B. No. 3980
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77 A BILL TO BE ENTITLED
88 AN ACT
99 relating to the regulation of fantasy contests; requiring an
1010 occupational license; imposing an administrative penalty;
1111 authorizing fees; imposing a tax.
1212 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1313 SECTION 1. Subtitle B, Title 13, Occupations Code, is
1414 amended by adding Chapter 2053 to read as follows:
1515 CHAPTER 2053. FANTASY CONTESTS
1616 SUBCHAPTER A. GENERAL PROVISIONS
1717 Sec. 2053.001. DEFINITIONS. In this chapter:
1818 (1) "Adjusted gross fantasy contest receipts" means an
1919 amount equal to the sum of all entry fees a fantasy contest operator
2020 collects from participants less the sum of all prizes paid to
2121 participants multiplied by the location percentage.
2222 (2) "Athlete" means a professional or amateur
2323 competitor in an actual sporting event that is:
2424 (A) regulated by a governing body; and
2525 (B) held between competitors who play
2626 individually or as teams.
2727 (3) "Commission" means the Texas Lottery Commission.
2828 (4) "Entry fee" means the amount of cash or cash
2929 equivalent a participant pays in advance to participate in a
3030 fantasy contest offered by a fantasy contest operator.
3131 (5) "Fantasy contest" means an online fantasy or
3232 simulated game or a contest of skill:
3333 (A) that charges an entry fee; and
3434 (B) in which:
3535 (i) the value of all prizes offered to a
3636 winning participant are established and disclosed to the
3737 participant in advance of the contest;
3838 (ii) all winning outcomes reflect the
3939 participant's relative knowledge and skill;
4040 (iii) the participant assembles, owns, or
4141 manages a fictional roster of actual athletes;
4242 (iv) the participant competes for prizes a
4343 fantasy contest operator awards based on terms the fantasy contest
4444 operator publishes and discloses to the participant in advance of
4545 the contest;
4646 (v) participants compete against each other
4747 or a single participant competes against a target score the fantasy
4848 contest operator establishes;
4949 (vi) a winning outcome is determined solely
5050 by clearly established scoring criteria based on statistical
5151 results of athlete performance, including a fantasy score; and
5252 (vii) a winning outcome is not based on the
5353 score, the point spread, or any performance of one actual team or a
5454 combination of teams or solely on one performance of an individual
5555 athlete in one actual sporting event.
5656 (6) "Fantasy contest operator" means a person who
5757 offers fantasy contests to the public. The term does not include an
5858 Internet service or mobile data service provider who digitally
5959 transfers general information that may include a fantasy contest.
6060 (7) "Location percentage" means the percentage
6161 rounded to the nearest 0.1 percent of the total amount of entry fees
6262 a fantasy contest operator collects from participants located in
6363 this state, divided by the total amount of entry fees the operator
6464 collects from all participants in the fantasy contest.
6565 (8) "Participant" means an individual who
6666 participates in a fantasy contest offered by a fantasy contest
6767 operator. The term does not include an operator who only:
6868 (A) sets house rules for a fantasy contest;
6969 (B) assigns a salary or target score to any
7070 eligible athlete;
7171 (C) accepts an entry fee from an individual who
7272 participates in a fantasy contest; or
7373 (D) awards or disburses prizes in accordance with
7474 this chapter.
7575 (9) "Prohibited participant" means:
7676 (A) an individual who has self-excluded from
7777 participation in fantasy contests under this chapter; or
7878 (B) an athlete, coach, referee, trainer, or staff
7979 member of a sports team, if a fantasy contest entry includes an
8080 athlete selection from a sporting event overseen by the same sports
8181 governing body that oversees the athlete, coach, referee, trainer,
8282 or member.
8383 (10) "Sporting event" means an actual athletic event,
8484 an organized video game competition, or other event the commission
8585 approves that is regulated by a sports governing body and is held as
8686 a competition between athletes who play individually or as teams.
8787 (11) "Sports governing body" means the organization
8888 that prescribes rules and enforces codes of conduct for a sporting
8989 event and the athletes competing in the sporting event.
9090 Sec. 2053.002. FANTASY CONTEST NOT GAMBLING. A fantasy
9191 contest conducted under this chapter does not constitute gambling
9292 for any purpose, including under Chapter 47, Penal Code.
9393 Sec. 2053.003. CONSTRUCTION OF CHAPTER. (a) This chapter
9494 shall be construed liberally to promote the general welfare of the
9595 public and the integrity of the fantasy contest industry.
9696 (b) The commission may not:
9797 (1) adopt rules limiting or regulating:
9898 (A) the house rules or administration of a single
9999 fantasy contest;
100100 (B) the statistical composition of a fantasy
101101 contest; or
102102 (C) the digital platform of a fantasy contest
103103 operator; or
104104 (2) in any way limit or restrict the types of fantasy
105105 contests allowed under this chapter by labelling the contest as
106106 gambling.
107107 (c) Notwithstanding any other law, the operation of a
108108 fantasy contest is lawful only when conducted in accordance with
109109 this chapter and rules adopted under this chapter.
110110 SUBCHAPTER B. COMMISSION POWERS AND DUTIES
111111 Sec. 2053.051. REGULATION OF FANTASY CONTEST OPERATORS.
112112 The commission shall regulate the conduct of fantasy contest
113113 operators under this chapter.
114114 Sec. 2053.052. GENERAL POWERS. The commission may exercise
115115 the powers necessary to enforce this chapter and rules adopted
116116 under this chapter.
117117 Sec. 2053.053. RULES. (a) The commission shall adopt the
118118 rules the commission considers necessary for the implementation,
119119 administration, and enforcement of this chapter.
120120 (b) Rules the commission proposed under this chapter may be
121121 adopted as emergency rules under Section 2001.034, Government Code.
122122 Sec. 2053.054. REVENUE COLLECTION. The commission shall
123123 assess and collect each fee or tax imposed under this chapter.
124124 Sec. 2053.055. ENFORCEMENT. (a) The commission shall
125125 require fantasy contest operators to implement procedures to
126126 prevent fraud, abuse, and money laundering in the operation of
127127 fantasy contests.
128128 (b) The commission shall verify each fantasy contest
129129 operator implements:
130130 (1) technology and procedures to prevent
131131 participation in a fantasy contest by an individual who is under 18
132132 years of age;
133133 (2) identity verification procedures, including as
134134 necessary the use of a reputable independent third-party in the
135135 business of verifying individuals' personally identifiable
136136 information to detect potential prohibited participants;
137137 (3) mechanisms on the operator's platform designed to
138138 detect and prevent unauthorized accounts, fraud, money laundering,
139139 and collusion; and
140140 (4) geolocation technology to verify a participant
141141 does not enter a fantasy contest from a restricted jurisdiction, as
142142 determined by commission rule.
143143 (c) The commission may cooperate with an investigation
144144 conducted by a law enforcement agency, including providing and
145145 facilitating the provision of account-level entry and
146146 participation information.
147147 Sec. 2053.056. COMPULSIVE AND PROBLEM GAMING STANDARDS.
148148 The commission by rule shall establish compulsive and problem
149149 gaming standards consistent with this chapter for fantasy contest
150150 operators.
151151 SUBCHAPTER C. FANTASY CONTEST OPERATOR LICENSE
152152 Sec. 2053.101. FANTASY CONTEST OPERATOR LICENSE REQUIRED.
153153 A person may not offer or operate a fantasy contest in this state
154154 unless the person holds a fantasy contest operator license issued
155155 by the commission.
156156 Sec. 2053.102. LICENSE APPLICATION. (a) An applicant for a
157157 fantasy contest operator license shall submit an application in
158158 accordance with commission rules.
159159 (b) An application for a fantasy contest operator license
160160 must include:
161161 (1) the applicant's:
162162 (A) name;
163163 (B) principal place of business;
164164 (C) contact information; and
165165 (D) social security number or any applicable
166166 federal tax identification number;
167167 (2) the identity of each individual who has an
168168 ownership interest of at least 10 percent in the applicant or in
169169 shares of the applicant;
170170 (3) criminal history record information of the
171171 applicant;
172172 (4) any ownership interest in a fantasy contest
173173 operator or similar entity in any jurisdiction that is held by a
174174 director, officer, key employee, or individual owner of at least 10
175175 percent of the applicant;
176176 (5) the identity of any business, including a business
177177 in the jurisdiction where the business is incorporated or
178178 registered, in which the applicant or a director, officer, key
179179 employee, or individual owner of at least 10 percent of the
180180 applicant holds an equity interest of at least five percent;
181181 (6) a statement on whether the applicant or a
182182 director, officer, key employee, or individual owner of at least 10
183183 percent of the applicant has ever applied for or been granted any
184184 license, registration, or certificate issued by a licensing
185185 authority in this state or any other jurisdiction for a gaming
186186 activity;
187187 (7) a statement on whether the applicant or a
188188 director, officer, key employee, or individual owner of at least 10
189189 percent of the applicant has filed or been served with a complaint
190190 or other notice filed by a governmental entity regarding
191191 delinquency in payment of or dispute over filings concerning the
192192 payment of any tax required under federal, state, or local law,
193193 including the amount of tax, the type of tax, the taxing agency, and
194194 the period applicable to the complaint or notice; and
195195 (8) information the commission determines is
196196 sufficient to demonstrate the applicant satisfies the requirements
197197 of this chapter and rules adopted under this chapter.
198198 (c) On commission request, an applicant for a fantasy
199199 contest operator license that is a business entity shall include in
200200 the application the criminal history record information of an
201201 individual who is:
202202 (1) a director, officer, or key employee of the
203203 applicant; or
204204 (2) any individual with an ownership interest of 10
205205 percent or more in the applicant.
206206 (d) The commission by rule may establish additional
207207 qualifications and requirements for a fantasy contest operator
208208 license applicant or license holder as necessary to preserve the
209209 integrity and security of fantasy contests in this state and to
210210 promote and maintain a competitive fantasy contest market.
211211 Sec. 2053.103. CRIMINAL HISTORY RECORD INFORMATION;
212212 FINGERPRINTS. (a) An applicant for a fantasy contest operator
213213 license shall submit fingerprints in accordance with this section
214214 to the commission or to the Department of Public Safety, as
215215 determined by commission rule, for the purpose of obtaining
216216 criminal history record information from the Department of Public
217217 Safety and the Federal Bureau of Investigation.
218218 (b) Fingerprints must be furnished under Subsection (a) by
219219 the applicant's:
220220 (1) owners;
221221 (2) officers;
222222 (3) directors for a corporation applicant;
223223 (4) managers and members for a limited liability
224224 company applicant; and
225225 (5) partners for a partnership applicant.
226226 (c) Each set of fingerprints submitted under Subsection (a)
227227 must be accompanied by an authorization signed by the fingerprinted
228228 individual for the release of information by the Department of
229229 Public Safety and the Federal Bureau of Investigation.
230230 (d) Notwithstanding Subsection (a), an applicant or an
231231 individual described by Subsection (b) who has submitted to a check
232232 of national criminal history record information in any state in the
233233 preceding year before submitting an application under this chapter
234234 is not required to submit to another check of criminal history
235235 record information if the applicant or individual:
236236 (1) provides the results of the previous check of
237237 criminal history record information to the commission; and
238238 (2) affirms no material change has occurred in the
239239 individual's criminal history record information since the check
240240 was conducted.
241241 Sec. 2053.104. INITIAL LICENSE FEE. (a) Except as provided
242242 by Subsection (b), a fantasy contest operator operating in this
243243 state at any time during the preceding year shall remit to the
244244 commission an initial license fee of:
245245 (1) an amount equal to eight percent of the operator's
246246 adjusted gross fantasy contest receipts from the preceding calendar
247247 year; or
248248 (2) $500,000.
249249 (b) A fantasy contest operator that has not operated in this
250250 state at any time during the preceding year shall remit to the
251251 commission an initial license fee of $5,000. A fantasy contest
252252 operator that pays the initial license fee under this subsection
253253 shall remit to the commission a supplemental license fee of the
254254 lesser of:
255255 (1) an amount equal to 10 percent of the operator's
256256 adjusted gross fantasy contest receipts for the first year of
257257 licensure, beginning on the date of licensure, less the amount of
258258 the initial license fee; or
259259 (2) $5,000.
260260 Sec. 2053.105. ISSUANCE OR DENIAL OF LICENSE. (a) On
261261 receipt of a completed application for a fantasy contest operator
262262 license and the required fee, the commission shall conduct the
263263 necessary background investigation to determine whether the
264264 applicant satisfies the qualifications for the license.
265265 (b) On completion of the necessary background
266266 investigation, the commission shall issue a license or deny the
267267 application. The commission may not issue a license to an applicant
268268 convicted of a disqualifying offense.
269269 (c) If the application is denied, the commission shall
270270 forward a statement of the grounds for denial to the applicant and
271271 all other documents on which the commission relied, to the extent
272272 allowed by law.
273273 Sec. 2053.106. LICENSE TERM. (a) A license issued under
274274 this chapter expires on the fourth anniversary of the date of
275275 issuance.
276276 (b) The commission may not require the holder of a fantasy
277277 contest operator license to surrender or terminate the license
278278 before the expiration date of the license solely because of rules
279279 amended under this chapter.
280280 Sec. 2053.107. LICENSE RENEWAL. (a) The commission shall
281281 establish a process for renewing a fantasy contest operator license
282282 issued under this chapter, including the assessment of a renewal
283283 fee in an amount equal to one percent of the license holder's
284284 adjusted gross fantasy contest receipts for the preceding four
285285 years.
286286 (b) The commission may require an applicant for renewal of a
287287 fantasy contest operator license to submit to additional criminal
288288 history record information checks as described by Section 2053.103.
289289 (c) The commission may grant an extension of time for the
290290 renewal of a fantasy contest operator license on receipt of a
291291 written request submitted by the license holder.
292292 (d) A fantasy contest operator license holder that allows
293293 the license to lapse without requesting an extension of time to file
294294 for renewal of the license must submit an initial license
295295 application.
296296 Sec. 2053.108. APPLICANT OPERATION DURING LICENSE
297297 APPLICATION PERIOD. (a) A fantasy contest operator that submits an
298298 application for a license or license renewal under this chapter may
299299 operate during the application period unless the commission:
300300 (1) has reasonable cause to believe the fantasy
301301 contest operator is or may be in violation of this chapter or rules
302302 adopted under this chapter; and
303303 (2) requires the fantasy contest operator to suspend
304304 operation of any fantasy contest until the license or license
305305 renewal is issued.
306306 (b) Notwithstanding Subsection (a), a fantasy contest
307307 operator that offered fantasy contests to individuals located in
308308 this state before September 1, 2025, may continue to offer contests
309309 to those individuals until the commission approves or denies the
310310 fantasy contest operator's application under this chapter if the
311311 fantasy contest operator files the application with the commission
312312 not later than the 90th day after the date the commission adopts
313313 rules to implement this chapter. This subsection expires September
314314 1, 2029.
315315 Sec. 2053.109. INDEPENDENT AUDIT. (a) Subject to
316316 Subsection (b), an applicant for an initial or renewal fantasy
317317 contest operator license shall:
318318 (1) contract with a certified public accountant to
319319 conduct an independent audit consistent with generally accepted
320320 accounting principles;
321321 (2) annually contract with a testing laboratory,
322322 certified public accountant, or another professional service
323323 provider the commission recognizes to verify in a written report
324324 compliance with this chapter and rules adopted under this chapter;
325325 and
326326 (3) submit to the commission a copy of the audit report
327327 and a copy of the compliance report provided by the entity with
328328 which the applicant contracted under Subdivision (2).
329329 (b) An applicant for an initial fantasy contest operator
330330 license under this chapter is not required to submit an audit report
331331 and a compliance report until after the second anniversary of the
332332 initial license issuance.
333333 SUBCHAPTER D. OPERATION OF FANTASY CONTEST
334334 Sec. 2053.151. MINIMUM AGE OF PARTICIPANT. An individual
335335 may not participate in a fantasy contest under this chapter if the
336336 individual is younger than 18 years of age.
337337 Sec. 2053.152. LOCATION OF PARTICIPANT. A fantasy contest
338338 operator license holder may only accept an entry from a participant
339339 physically located in this state. A fantasy contest operator must
340340 use a geolocation system to ensure each participant is physically
341341 present in this state when submitting a fantasy contest entry
342342 unless otherwise authorized by the commission.
343343 Sec. 2053.153. FANTASY CONTEST OPERATOR TAX. (a) For the
344344 privilege of holding a license to operate fantasy contests under
345345 this chapter, the commission shall impose and collect a tax at a
346346 rate equal to 10 percent of the fantasy contest operator's adjusted
347347 gross fantasy contest receipts.
348348 (b) The accrual method of accounting shall be used to
349349 calculate the amount of tax due. The fantasy contest operator shall
350350 submit to the commission on or before the last day of each calendar
351351 month:
352352 (1) a return indicating:
353353 (A) the amount of tax due under this section for
354354 the preceding calendar month; and
355355 (B) any other information the commission by rule
356356 requires; and
357357 (2) payment of the tax due under this section.
358358 Sec. 2053.154. COMPULSIVE GAMING; VOLUNTARY
359359 SELF-EXCLUSION. (a) Each fantasy contest operator licensed under
360360 this chapter shall include a statement regarding assistance with
361361 gambling problems on:
362362 (1) the license holder's portal, Internet website, or
363363 computer or mobile application; and
364364 (2) all of the license holder's marketing materials
365365 and advertisements.
366366 (b) The commission shall maintain a voluntary
367367 self-exclusion list of individuals who request to be prohibited
368368 from establishing a fantasy contest account with a fantasy contest
369369 operator under this chapter.
370370 (c) A fantasy contest operator may not pay a prize to an
371371 individual included on the commission's self-exclusion list. A
372372 prize won by an individual on the self-exclusion list is forfeited.
373373 The fantasy contest operator shall donate any forfeited prize to a
374374 problem gaming program, as identified and directed by the
375375 commission, not later than the 25th day of the month following the
376376 end of each quarter.
377377 (d) If a self-excluded individual participates in a fantasy
378378 contest, the fantasy contest operator shall report to the
379379 commission:
380380 (1) the name of the self-excluded individual;
381381 (2) the date of the self-excluded individual's
382382 participation in the fantasy contest;
383383 (3) the amount or value of any prizes forfeited by the
384384 self-excluded individual; and
385385 (4) any other action taken by the fantasy contest
386386 operator.
387387 (e) A fantasy contest operator shall develop and maintain a
388388 program to mitigate and curtail compulsive play, which may be
389389 implemented in conjunction with the commission.
390390 SUBCHAPTER E. REPORTING, INVESTIGATION, AND ENFORCEMENT
391391 Sec. 2053.201. REQUIRED REPORTING BY LICENSE HOLDER. The
392392 holder of a fantasy contest operator license shall promptly notify
393393 the commission of any information relating to:
394394 (1) a confirmed breach of the relevant sports
395395 governing body's internal regulations and codes of conduct
396396 regarding participation in fantasy contests that is provided to the
397397 fantasy contest operator;
398398 (2) conduct corrupting any outcome related to a
399399 sporting event for financial gain purposes, including match fixing;
400400 and
401401 (3) confirmed illegal activities, including use of
402402 money derived from illegal activity, entries to conceal or launder
403403 money derived from illegal activity, multi-accounting, and use of
404404 false identification.
405405 Sec. 2053.202. COMMISSION INVESTIGATION AND REPORTING OF
406406 PROHIBITED CONDUCT. (a) The commission shall investigate all
407407 reasonable allegations of prohibited conduct and refer any credible
408408 allegations to an appropriate law enforcement agency.
409409 (b) The identity of any person reporting prohibited conduct
410410 is confidential unless:
411411 (1) the person authorizes disclosure of the person's
412412 identity; or
413413 (2) the allegation of prohibited conduct is referred
414414 to a law enforcement agency.
415415 (c) If the commission receives a complaint of prohibited
416416 conduct by an athlete, the commission in accordance with commission
417417 rules shall notify the appropriate sports governing body of the
418418 athlete to review the complaint.
419419 (d) The commission shall adopt rules governing
420420 investigations of prohibited conduct and referrals to law
421421 enforcement agencies.
422422 Sec. 2053.203. LICENSE HOLDER COOPERATION WITH
423423 INVESTIGATION. A fantasy contest operator license holder may
424424 cooperate with investigations conducted by law enforcement
425425 agencies, including providing and facilitating the provision of
426426 account-level entry and participation information.
427427 Sec. 2053.204. ADMINISTRATIVE PENALTY. (a) The commission
428428 may impose an administrative penalty on a person licensed under
429429 this chapter who violates this chapter or a rule adopted under this
430430 chapter.
431431 (b) The amount of the penalty may not exceed $5,000, and
432432 each day a violation continues or occurs is a separate violation for
433433 the purpose of imposing a penalty. The amount shall be based on:
434434 (1) the seriousness of the violation, including the
435435 nature, circumstances, extent, and gravity of the violation;
436436 (2) the economic harm caused by the violation;
437437 (3) the history of previous violations;
438438 (4) the amount necessary to deter a future violation;
439439 (5) efforts to correct the violation; and
440440 (6) any other matter that justice may require.
441441 (c) The enforcement of the penalty may be stayed during the
442442 time the order is under judicial review if the person pays the
443443 penalty to the clerk of the court or files a supersedeas bond with
444444 the court in the amount of the penalty. A person who cannot afford
445445 to pay the penalty or file the bond may stay the enforcement by
446446 filing an affidavit in the manner required by the Texas Rules of
447447 Civil Procedure for a party who cannot afford to file security for
448448 costs, subject to the right of the commission to contest the
449449 affidavit as provided by those rules.
450450 (d) The attorney general may sue to collect the penalty.
451451 (e) A proceeding to impose the penalty is considered to be a
452452 contested case under Chapter 2001, Government Code.
453453 SECTION 2. Section 411.108(a-1), Government Code, is
454454 amended to read as follows:
455455 (a-1) The Texas Lottery Commission is entitled to obtain
456456 criminal history record information as provided by Subsection (a-2)
457457 that relates to a person:
458458 (1) licensed under Chapter 2001, Occupations Code;
459459 (2)[, or] described by Section 2001.3025, Occupations
460460 Code; or
461461 (3) holding or applying for a license under Chapter
462462 2053, Occupations Code.
463463 SECTION 3. Not later than February 1, 2026, the Texas
464464 Lottery Commission shall adopt the rules necessary to implement
465465 Chapter 2053, Occupations Code, as added by this Act.
466466 SECTION 4. Notwithstanding Section 2053.153, Occupations
467467 Code, as added by this Act, a fantasy contest operator license
468468 holder is not required to pay the tax established by that section
469469 before July 1, 2026.
470470 SECTION 5. This Act takes effect September 1, 2025.