Gambling in Texas: Online Gambling, Live Venues and Laws

Texas has come a long way in terms of the freedom to gamble. Just a few decades ago, Texas didn’t have a lottery, had no charitable gaming laws, no allowance for social gambling, and no casinos. Besides pari-mutuel wagering (and a massive underground illegal sports betting and poker network), Texans had no way to gamble. Fast-forward to today, and Texas is now home to two Class II casinos, a powerful and well-attended lottery, a carve-out for charitable bingo and raffles, and a loophole that sort of (kind of) makes home poker games legal.

Before we dig too much deeper into Texas’ gaming laws, let’s look at some key stats and information about the state’s gaming industry.

Over the past thirty years or so, chaos has reigned in the Texas legislature. This once proud Union democrat state has been totally overtaken by the Tea Party and the religious right. Gaming laws have changed so much in the past few decades, the state’s gaming laws are all but unrecognizable. They’re also difficult to dig through. Below, you’ll find our analysis of the current state of gambling law in Texas. Remember that we aren’t lawyers and we don’t intend this as legal advice. If you need legitimate legal advice about Texas gambling, consult a Texas lawyer with experience in the gaming business.

Outside of the lottery and exceptions for private, charitable, and carnival games, no traditional forms of gambling are legal in the Lone Star State.

Though Texas is one of America’s largest states, both in size and population, you’ll find just two venues identifying themselves as “casinos,” and as we discuss later, they’re hardly casinos at all. They’re required to go above and beyond in order to obey Texas’ strict gaming regulations.

The Aransas Queen is a converted mega-yacht that sails into international waters off the coast of Texas in order to legally offer casino games. The Aransas Queen is a new venture, having launched a maiden voyage in May of 2015. Sailing from Aransas Pass twice a day, The Aransas Queen hosts more than 200 slot games, a dozen live dealer tables, and a mini-sportsbook.

The Kickapoo Lucky Eagle Casino is the only casino in Texas, and it’s not much of one. You could stand in the parking lot of the Kickapoo Lucky Eagle and spit across the Mexican border. Located in remote Eagle Pass, Texas, the Lucky Eagle is a glorified slots parlor, with 2,800 class II slot-style games dominating the gaming floor. A poker room (with room for up to 12 games at once) hosts regular tournaments, and is converted to a live bingo hall for a couple of hours every weekend.

Another form of gambling you won’t find anywhere in Texas is sports betting. Where some states with popular lottery systems have allowed a form of parlay wagering, Texas is not on board. The one venue that hosts traditional sports betting in the state has to travel into international waters in order to do so.

Texans love their lotto games. Since legalization of the lottery in 1993, lotto sales in the state have average $90 million a week. The state has the widest variety of scratch cards in the country and participates in more regional and multi-state games than any other state in the Union. We’re a little curious about why a state that’s so against commercial and even tribal gambling loves the lottery so much, but we’ve been told that Texas is a land of contradictions.

Another area where state law is surprisingly liberal – social betting. Gambling that takes place in private and involves players with a legitimate social relationship are fully legal, regardless of stakes, rake, or other concerns. We’d like to say that this loophole in a strict set of anti-gaming laws has to do with a proud libertarian tradition in the Lone Star State, but it’s probably more to do with the inability of the government to police the private activities of 27 million people.

Race betting is the only form of gambling besides the lottery that’s widely accepted (legally and socially) across the state. Dog and horse racing tracks are a common sight, mostly in the state’s five largest cities.

In Texas’ biggest urban centers, like Houston, Dallas, and San Antonio, legal game rooms exist that offer games that look quite like slot and video poker terminals in Las Vegas. These venues offer the same type of games available at Texas’ two “casinos.” They’re called Class II pull-tab games.

What are these class II machines? How are they legal in a state that outlaws casino gambling? They’re not traditional slots like you’d find in any other American casino. In fact, both The Aransas Queen and the Kickapoo Lucky Eagle offer these “electronic pull-tab” machines that skirt the restriction on slot machines. Basically, since these games aren’t classified as slot machines under Texas law, they are legal.

Until you walk up to play a class II pull-tab game, you may think it’s a standard slot game. The difference is mostly technical – these games are built in such a way that they are classified differently than slots. This puts the games out of the jurisdiction of state authorities.

Class II pull-tab games are defined differently than slots under a Texas statute. We’re not totally clear on how they work – the descriptions are all just vague enough to be confusing. Basically, these devices are legal because they depend on information from a finite number of real-world (meaning printed paper) pull-tabs listed on a dedicated pull-tab server. If these games follow a few other rules and regulations as outlined by the state, they’re not considered illegal.

Another slot-like game popular in Texas is called an eight-liner. The name is based on the fact that they offer eight paylines. They’re similar in design to traditional slots, but pay out small prizes. By law, eight-liner payouts are supposed to top out at $5. That’s because any game that pays out something of value of $5 or less is covered by Texas’ “fuzzy animals law.” How common are eight-liner payouts above that $5 limit? As this recent report from a major Texas newspaper shows, near-universal. Game rooms hosting eight-liners are common in cities across the state.

Texas criminal code makes no specific mention of the practice of online gambling. We’re not lawyers, but we think that some existing Texas laws may apply to online betting. That’s not to say that Texas is actively seeking out online bettors for prosecution – they’re not. But we like to cover all the bases, so we’ve outlined some examples of how Texas law may apply.

First, there’s the issue of how Texas law defines gambling. If the definition can be found to include the practice of online gambling, then Web-based bettors in the Lone Star State should be careful.

The closest we get is a definition of the word “bet” in Section 47.01. To bet is to

The law goes further to say that illegal gambling’s outcomes must be controlled

In gambling law terms, that last line is known as the Dominant Factor test, and it allows for gambling based on matters of skill. But since, by definition, a bet on anything involving any element of chance is gambling, we think it’s clear that a prosecutor could argue that any Internet gambling is illegal by state law.

We also found this section in the part of the law that focuses on defining crimes related to “gambling devices,” which we think would be relevant in any case involving online gambling:

All this really does is clarify that a game that involves an element of skill isn’t necessarily a legal game. This section of the law implies that any game involving any amount of chance would automatically be considered illegal.

In short, Texas doesn’t explicitly outlaw online gambling, but legal precedent and existing laws could be used to prosecute online gamblers. Texas has yet to do so, and we think it is unlikely that they’d start out of nowhere.

Texas Attorney General Ken Paxton surprised absolutely no one when he spoke out in January to declare daily fantasy sports betting illegal. FanDuel immediately pulled out of the state, tough DraftKings is still accepting Texas citizens, for the time being. What’s going on in Texas? Why would a state that’s been steadily creeping toward legalization for decades suddenly refuse to recognize a skill game?

As part of the statement, Paxton had this to say:

Apparently, Paxton’s main beef is with the desire of DFS sites to claim something he calls the “actual-contestant exception,” a wrinkle in Texas law that makes it legal for contestants in an actual sporting event to bet on the outcome.

Paxton also pointed out that Texas gaming law requires only “partial chance” in order for an act to be considered gambling. That means that a slice of skill in DFS’ pie doesn’t make it a skill game. The small amount of chance involved predominates.

For their part, DraftKings (who’s staying in the fight for Texans’ business) says the Texas Legislature has authorized bets on games of skill, and they’re still arguing that the winners of DFS contests exhibit skill, not just good luck. You’ll hear the words “fundamental misunderstanding” out of their lobbyist’s mouths every minute or so.

The worst part about this decision? The Dallas Morning News recently revealed that the Texas Lottery Commission was trying to make backroom deals with DraftKings, offering that site exclusive rights to partner with the Texas Lottery to offer expanded DFS wagering in the state. An unknown commission stopped these efforts, and all but wiped out any possibility of a collaboration between the state of Texas and any DFS contest site in the future.

To date, the Texas legislature has yet to act on the issue of online gambling. There’s no law on the books in Texas that makes it a crime to place a bet over the Internet. The Texas Attorney General’s office has seen fit to rely on existing federal gambling regulations. There’s been some talk of adding some online gaming laws in the Lone Star State in the past few legislative sessions, but nothing has come of it. For the time being, Texans are free to place wagers at online gambling websites, provided they’re hosted offshore. No Texan has ever been prosecuted for placing an online bet with an offshore betting website.

Raffles are one of the few regulated forms of gambling that Texas citizens can sponsor and engage in without much government intervention. Of course, there’s a catch. Only a few organizations are allowed to host raffles:

An important caveat to this law highlights the fact that

Even if the raffle in question is for a charitable purpose, and even if the host doesn’t stand to profit at all from the raffle, it’s technically illegal, unless it’s hosted by an organization that fits one of the above categories. Also important – legal raffles can’t award cash prizes, only items like gift certificates, coupons, and real merchandise.

We’d like to give you a solid “yes” or “no” answer, but that’s not quite possible. It appears that these events are legal, provided you don’t charge an entry fee, rake the contests, or profit in any way from the games. In other words, if your event is free, you technically can host a Vegas night featuring traditional gambling games. Chapter 47 of the Texas Penal Code includes some information on this subject, and that’s where we got the idea that so long as you don’t charge a fee for playing you can hand out prizes. After all, what’s Vegas night without prizes?

We turned again to Chapter 47, and we were surprised to find that the answer here is “yes.” Here’s the problem – most charity groups wouldn’t want to host a poker tournament or poker night in Texas, because the hosts of the event aren’t allowed to make any money from the game. You can’t rake the game, you can’t have a hand in the game, and you can’t charge any entry fees or anything like that. In other words, if your charity did host the event, it would just be as a fun night for the participants, not for fundraising. As soon as a private poker event becomes a fundraising event it becomes illegal under Texas gaming statutes.

Texas’ two casinos are both Class II properties. That means they can only host Class II games. This is a category of game based on the rules of bingo. These are usually skill games, and most of the time they require that the player make an additional “skill spin,” in order to meet the requirements for legal gaming in Texas. The fact that these games are based on bingo means they’re legal in Texas, even though they’ve been modified in order to look and act like traditional slot and video poker games. Designers of these games have gotten very good at producing slot-like and video poker-like titles that still pass an inspection by Texas authorities. They aren’t quite slots, but you might not notice that just from playing the game. Their only identifying feature is a bingo card printed somewhere on the cabinet, a vestige of Class II’s insistence on bingo-style gaming.