Bill seeks to legalize poker in Texas

Doyle Brunson
Poker legend Doyle Brunson may see poker legalized in his home state of Texas.

Texas state legislator Jose Menendez has reintroduced a bill to legalize live poker in his state. But, as the saying goes, the devil is in the details, and the 40-page bill has a number of specific limitations and exceptions that keep it from being a broad legalization of poker in the state of Texas.

Nonetheless, if passed and signed into law, it would be a step in that direction.

House Bill 222, called The Poker Gaming Act of 2009, is Rep. Menendez' second attempt to have the state that gave its name to the most popular form of poker actually legalize that game.

Last year an earlier version of the bill made it out of committee. It garnered a great deal of attention as well as support from the Texas Poker PAC, Texas Cardplayers Association and the Poker Players Alliance, and a public hearing on the bill drew dozens of poker pros in support of it, including Clonie Gowen, Lyle Berman, Erick Lindgren and Crandell Addington.

But fear that the bill may have been too controversial heading into the primary season caused it to be scheduled too far down a packed list of proposed legislation, and time simply ran out before it could be brought up for consideration.

Perspective on poker key element of bill

The new bill begins with the statement that as a matter of public policy, the Texas legislature finds that poker is a game of skill and not a game of chance as prohibited by the Texas Constitution.

The Texas Constitution specifically prohibits "lottery and gift enterprises," and if poker fell into that category, a two-thirds majority vote would be needed to pass the bill (that is, to amend the Constitution). If poker is excluded from that category, then only a simple majority is required.

The bill further provides as a general statement that regulating and licensing poker is the best way to ensure that it is conducted honestly and competitively and is free from criminal elements.

At the hearing on the bill last year, Rep. Menendez raised the issue of public safety as a reason to legalize - then license and regulate - poker, rather than continue to allow unregulated poker to strain scarce law-enforcement resources.

Then the bill sets forth the specific rules and guidelines regarding the licensing and operating of poker games in the state. "Poker" is defined as Texas Hold'em or any variation or combination of Texas Hold'em, but does not include Internet poker.

While it would seem that Omaha would be included as a variation of Hold'em, it is unclear if the bill intentionally excludes such games as Stud, Razz and Draw. What is clear is that Internet poker is not legalized under this bill.

Rigorous licensing requirements

There are two types of licenses available, one for charitable operators and one for commercial operators of poker games, and neither provides blanket coverage under the law. For charitable operators, they must obtain a new permit for each tournament they run. For commercial operators, they need a separate license for each of their locations.

Also, operators cannot have an unlimited number of tables at any location; the Texas Lottery Commission will prescribe a maximum number.

It is up to the Commission to adopt the rules and standards by which it will determine whether someone seeking a charitable operator's license will use the revenue from any poker tournament for "bona fide" charitable purposes.

And the bill does not just require the operator of the charity tournament to be licensed; it also requires the nonprofit that is getting the proceeds to obtain a license from the Commission.

Certain types of businesses have a leg up in the licensing process over other businesses. The bill provides for mandatory licensing of some classes of commercial operators: those which have alcoholic beverage licenses or pari-mutuel licenses, or are federally recognized Indian tribes - so long as they also meet certain other minimum requirements.

All other entities seeking to become licensed commercial operators may apply, but will not be guaranteed licensing, even if they meet the basic criteria.

Under the bill, not only are the gaming operators licensed, but poker dealers, some other gaming operator employees (at the discretion of the Commission), and even poker gaming equipment manufacturers and distributors are required to obtain annually renewable licenses to conduct their business.

Fees and taxation rates

There is an application fee to apply for the license, and then an additional licensing fee if the license is granted. The amount of both is $2,000 for both commercial and charitable operators, $200 for the nonprofit organization, $200 for dealers and $500 a year for manufacturers and distributors of gaming equipment.

The commercial and charitable operators have to report their total gross receipts daily and pay taxes on them under prescribed guidelines, at rates of 18% for the commercial operators, a slight discount to 16% for pari-mutuel operators, and 5% for charitable operators.

The taxes paid on these gross receipts go into a poker gaming revenue fund, 50% of which goes to the Department of Housing and Community Affairs to be used to provide homeless shelters and other social services for the homeless. The remainder will be allotted to the housing trust fund.

While there is no limitation on the hours of operation, there are table limits for tournaments. The licensed operator may conduct tournaments at any time, but they are limited to the extent that they can charge a buy-in fee not to exceed $100 and a tournament registration fee not to exceed $30.

Other provisions in the bill include the establishment of bad beat and other bonus hand jackpots, but with caps of just $250. The bill also sets the maximum rake at the tables of 10% a pot, not to exceed $4 a hand, which is standard in the poker industry.

Certain provisions of the bill seem to favor the use of electronic poker tables over traditional hand-dealt tables, in addition to the daily reporting requirement, which could be fulfilled automatically using the electronic tables.

Indeed, the bill also includes a provision that only up to 50 poker hands can be dealt from a single deck and that each deck must be "monitored and cataloged in a log that documents the exact locate of the cards on a licensed operator's premise." This provision would seem to add an unnecessary expense that might make electronic tables more appealing to operators.

The Texas State Legislature will convene for its next regular session on Jan. 13, 2009, and the eyes of the poker world will be on HB 222 as it works its way through committee and to the House for its vote. If passed, the bill would take effect Sept. 1, 2009.

Although it is not a blanket legalization of all forms of poker in the state of Texas, this bill would certainly be a welcome move toward putting the "Texas" back into Texas Hold'em.

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