Texas State Rep. Dutton Introduces Mobile-Only Sports Betting Bill, 6.25 Percent Tax Rate

Posted on: January 22, 2021, 08:17h. 

Last updated on: January 22, 2021, 12:47h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Rep. Harold Dutton Jr. (D-Houston) recently introduced mobile-only sports wagering legislation in the Texas state House. The proposal limits the number of permits issued to five and features a favorable tax rate of 6.25 percent.

Texas sports betting
Texas State Rep. Harold Dutton, Jr., seen here. Rep. Dutton recently proposed sports betting legislation. (Image: Texas Tribune)

Dutton is one of the longest-serving members in the state’s House of Representatives. He proposes that the Texas Department of Licensing and Regulation oversee a system in which five licenses are issued and each operator could run up to two online brands.

House Bill 1121 (HB 1121) differs wildly from a separate proposal that reportedly has the backing of some of the Lone Star State’s most famous professional sports owners. A plan supported by Dallas Cowboys owner Jerry Jones, along with Mark Cuban and Tilman Fertitta would allow pro sports franchises and Texas pari-mutuel facilities to become license holders.

Cuban is the owner of the NBA’s Dallas Mavericks. Fertitta owns the Houston Rockets.

That legislation would allow horse tracks, greyhound tracks, and sports teams to operate online sports betting via a single skin, among other things. We estimate that there would be 16 available skins,” said Eilers & Krejcik in the most recent edition of its bi-weekly EKG Line report.

Other forecasts indicate 14 to 20 skins could be made available. After procuring a skin, a team or racetrack could partner with an operator, such as DraftKings, FanDuel, or Penn National Gaming. Each of the three aforementioned services already has sports wagering investments.

Jones holds an equity stake in DraftKings, while Cuban is an investor in esports betting platform Unikrn. Fertitta’s Golden Nugget Online Gaming (GNOG), which recently went public, holds sportsbook licenses in several states.

Dutton Details

As is often the case in politics, there’s some good and bad news in Dutton’s HB 1121. A positive is the proposed tax rate of 6.25 percent.

If this legislation is passed and signed into law by Gov. Greg Abbott (R), Texas would have one of the lowest sports betting levies in the country. At 6.25 percent, the state would be half a percent below Iowa and Nevada, and 225 basis points below New Jersey, the largest sports wagering market in the US. Dutton’s proposed tax scheme is also far more favorable than the 34 percent and 51 percent, respectively, in place in Pennsylvania and Rhode Island.

On the other hand, HB 1121 forbids betting on Texas colleges.

That’s potentially meaningful when accounting for the fact that football is the most wagered-on sport in the US, the most popular sport in the Lone Star State, and the state is home to a dozen schools that play at the Football Bowl Subdivision (FBS) level.

Obstacles to Passage

With Texas being the second-largest state, there’s an obvious desire among operators to see sports wagering come to life there. But hurdles are plentiful.

“Abbott opposes gambling expansion. Legislative approval thresholds are high,” notes Eilers & Krejcik. “Las Vegas Sands is lobbying for land-based casino authorization—an effort that could deprive online sports betting of political oxygen. The list of obstacles go on.”

However, other reports indicate that Abbott is warming to sports betting and that it’s Lt. Gov. Dan Patrick that’s more opposed to the idea. Both are Republicans. Patrick also acts as president of the state senate, where it’s believed some members are against gaming expansion of any type on moral grounds.

The other “problem” is Texas’s strong fiscal position. While some states are scrambling for revenue in the wake of COVID-19, the Lone Star State faces only modest shortfalls in the coming fiscal year, meaning debate on issues such as cannabis, casinos, and sports wagering is a luxury, not a necessity.