83R4810 GCB-F
	By: Raymond	H.B. No. 2729

	A BILL TO BE ENTITLED
	AN ACT
	relating to the operation of video lottery games by licensed horse
	and greyhound racetrack operators, to 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; authorizing
	fees.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1.  The legislature finds and declares the
	following:
	(1)  The horse industry and agriculture industry have
	been vital components of this state's economy since the 19th
	century.
	(2)  The horse industry is an important element of the
	state's unique fabric, and it is imperative that the legislature
	take steps to support this industry.
	(3)  Live racing greatly benefits the horse industry of
	this state by providing critical financial and other support to
	horse shows and events, breeding programs, and employment in
	tourism and agricultural enterprises in this state.
	(4)  The operation of video lottery games at horse
	racetracks in the neighboring states of Louisiana, New Mexico, and
	Oklahoma provides racetracks in those states with an insurmountable
	economic advantage over racetracks in this state, resulting in much
	larger purse amounts in those states than in this state.
	(5)  The consequence of this economic disparity in
	purse amounts has been the exodus of horses, breeders, and other
	horse professionals to states with larger purse amounts, placing
	the horse industry in this state at an overwhelming disadvantage
	that threatens the very existence of a vital horse industry in this
	state.
	(6)  Authorizing video lottery games at licensed horse
	and greyhound racetracks in this state will:
	(A)  remedy this economic disparity by increasing
	the purse amounts in this state and delivering a huge economic
	stimulus to this state through increased infrastructure and
	employment in and around licensed racetracks and throughout this
	state;
	(B)  increase horse showing and breeding
	programs;
	(C)  increase employment in tourism;
	(D)  support programs to foster horse and
	greyhound breeding; and
	(E)  improve the living and working conditions of
	personnel who work in the horse industry.
	SECTION 2.  Section 466.002, Government Code, is amended to
	read as follows:
	Sec. 466.002.  DEFINITIONS. In this chapter:
	(1)  "Commission" means the Texas Lottery Commission.
	(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)  "Dedicated account" means a separate fiduciary
	financial account that is restricted under this chapter according
	to:
	(A)  the source of the funds that may be deposited
	into the account; or
	(B)  the enumerated purposes for which money from
	the account may be spent.
	(4)  "Director" means a [the] director employed by the
	executive director under Section 467.031 [of the division].
	(5)  "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.
	(6)  "Distribute," with respect to video lottery
	terminals, means the sale, lease, marketing, offer, or other
	disposition of 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.
	(7) [(3)]  "Division" means the lottery division
	established by the commission under Chapter 467.
	(8)  "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.
	(9) [(4)]  "Executive director" means the executive
	director of the commission.
	(10)  "Horsemen's organization" has the meaning
	assigned by Section 1.03, Texas Racing Act (Article 179e, Vernon's
	Texas Civil Statutes).
	(11)  "House-banked game" means a game of chance in
	which the house:
	(A)  plays as a participant;
	(B)  competes against all players, collects from
	all losers, and pays all winners; and
	(C)  has an opportunity to win.
	(12)  "Indian lands" means land described by Section
	47(f), Article III, Texas Constitution.
	(13)  "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 17
	C.F.R. Section 230.144A and the rules 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 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 United States Securities and Exchange
	Commission;
	(v)  a group composed entirely of persons
	specified by this paragraph; or
	(vi)  any other person the commission
	recognizes as an institutional investor for reasons consistent with
	the policies expressed in this chapter.
	(14) [(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].
	(15) [(6)]  "Lottery game" means an activity conducted
	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].
	(16) [(7)]  "Lottery operator" means a person selected
	under Section 466.014(b) to operate a lottery game.
	(17)  "Manufacture," with respect to video lottery
	terminals, means to design, assemble, fabricate, produce, program,
	or make modifications 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.
	(18)  "Net terminal income" means the total amount of
	money paid to play video lottery games less the value of all
	credits, including any progressive prizes and bonuses, redeemed by
	the players of the video lottery games at a video lottery terminal
	establishment.  The deductions from the total may not include
	promotional prizes unrelated to video lottery game wagers.
	(19)  "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).
	(20)  "Performance horse development fund" means an
	account dedicated to certain non-racing horse activities in this
	state into which a portion of net terminal income is deposited as
	provided by Subchapter K.
	(21)  "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.
	(22) [(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.
	(23)  "Racetrack" has the meaning assigned by Section
	1.03, Texas Racing Act (Article 179e, Vernon's Texas Civil
	Statutes).
	(24)  "Racing facilities agreement" means a written
	agreement that:
	(A)  specifies the amount of money or the
	percentage of revenue to be transferred by a racetrack and from the
	applicable Texas canine development fund or Texas equine
	development fund to the racing facilities capital improvement
	account; and
	(B)  provides a plan for the use of the money
	deposited in the account.
	(25) [(9)]  "Sales agent" or "sales agency" means a
	person licensed under this chapter to sell tickets.
	(26)  "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, or authorized under other law.
	(27)  "State horse breed registry" has the meaning
	assigned by Section 1.03, Texas Racing Act (Article 179e, Vernon's
	Texas Civil Statutes). The term includes the organizations
	identified in Section 9.02, Texas Racing Act (Article 179e,
	Vernon's Texas Civil Statutes).
	(28)  "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.
	(29)  "Texas canine development fund" means, for a
	greyhound racetrack that operates a video lottery terminal
	establishment, the dedicated account in which a portion of the net
	terminal income is deposited as provided by Subchapter K.
	(30)  "Texas equine development fund" means, for a
	horse racetrack that operates a video lottery terminal
	establishment, the dedicated account in which a portion of the net
	terminal income is deposited as provided by Subchapter K.
	(31) [(10)]  "Ticket" means any tangible evidence
	issued to provide participation in a lottery game authorized by
	this chapter other than a video lottery game.
	(32)  "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.
	(33)  "Video lottery central system provider" means a
	person that, under a contract with the commission, provides the
	video lottery central system.
	(34)  "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.
	(35)  "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.  The term includes video lottery
	games linked together between two or more video lottery terminals
	in one or more video lottery terminal establishments to provide
	progressive payments to winners of video lottery games.
	(36)  "Video lottery manager" means a person who is
	licensed by the commission under this chapter to manage a video
	lottery terminal establishment.
	(37)  "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.
	(38)  "Video lottery system" has the meaning assigned
	to that term by Section 47a, Article III, Texas Constitution.
	(39)  "Video lottery terminal" means  an interactive
	electronic device that is capable of displaying video lottery
	games.
	(40)  "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.
	(41)  "Video lottery terminal provider" means a person
	in the business of manufacturing or distributing video lottery
	terminals in this state.
	(42)  "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 3.  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 4.  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 5.  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 this chapter [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 6.  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 7.  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 and to provide a written 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 certificate of 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.
	(c)  To protect the state's financial interest, the
	commission shall adopt reporting, monitoring, and auditing
	requirements for revenue generated by video lottery games that is
	distributed to or used by an organization through an allocation
	specified under Subchapter K.
	(d)  The commission may adopt the requirements for an
	organization described by Subsection (c) only after consultation
	with the organization. In adopting the requirements, the commission
	shall give consideration to the concerns of the organization.
	(e)  An organization described by Subsection (c) shall
	annually file with the commission a copy of an audit, conducted by
	an independent certified public accountant, on the receipt and use
	by the organization of the revenue generated by video lottery
	games.
	(f)  The commission may review any records or books of an
	organization submitting an audit to the commission as required
	under Subsection (e) as the commission determines necessary to
	confirm or further investigate the findings of the audit.
	(g)  The commission, after notice and a hearing in accordance
	with Chapter 2001, may suspend or prohibit the transfer of money to
	an organization under Subchapter K if:
	(1)  the commission determines the organization has
	failed to comply with the requirements adopted under Subsection
	(c); or
	(2)  following the audit required under Subsection (e),
	the commission determines that material questions have been raised
	on the use of the money by the organization.
	SECTION 8.  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 9.  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 10.  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 and data 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 furnished to the commission
	under Subchapter K or that may be otherwise obtained by the
	commission from any source, including information that:
	(1)  pertains to an applicant's criminal record,
	antecedents, and background;
	(2)  is 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;
	(3)  is obtained by the commission from a video lottery
	manager, video lottery retailer, video lottery terminal provider,
	or video lottery central system provider; or
	(4)  is 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 wholly or partly 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 11.  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 12.  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 13.  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 considered unsuitable to be a video
	lottery terminal provider under Subchapter K.
	SECTION 14.  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 15.  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 and Sections
	466.020 and 466.201, 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 16.  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 17.  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 18.  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 is used in any manner other
	than to generate revenue for this state or for the payment by the
	commission of 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 19.  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 20.  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 21.  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 22.  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 23.  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 24.  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 25.  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 26.  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 27.  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 28.  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 29.  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 authorized 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, horse shows and events, horse and greyhound
	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 this
	subchapter and the Texas Racing Act (Article 179e, Vernon's Texas
	Civil Statutes), the Alcoholic Beverage Code, or other law, this
	subchapter controls.
	(c)  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.
	(d)  Shipments of video lottery equipment operated under
	commission authority and this subchapter are exempt from 15 U.S.C.
	Sections 1171-1178.
	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, certificate of registration, finding of
	suitability, or other affirmative regulatory approval under this
	subchapter is authorized to engage under the license, certificate
	of registration, finding of suitability, or other affirmative
	regulatory approval, is also authorized for the conduct of video
	lottery terminals by Indian tribes that is allowed under other law.
	Sec. 466.504.  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).
	Sec. 466.505.  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. 466.506.  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.
	Sec. 466.507.  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 or approved
	video lottery terminal provider or an applicant applying for
	registration or approval 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. 466.508.  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 certificate of registration
	or other approval as a video lottery terminal provider under this
	section.
	(b)  Unless suspended or revoked, the certificate of
	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 approval as required
	by this section, an applicant must satisfy all applicable
	requirements under this subchapter.
	Sec. 466.509.  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 certificate of registration or other
	approval has been granted.
	(d)  The applicant shall comply with all federal and state
	laws, local ordinances, and rules.
	Sec. 466.510.  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 approving video lottery terminals.
	(b)  Application fees paid under this section may only be
	appropriated to the commission to defray costs incurred in the
	administration and enforcement of this subchapter relating to the
	operation of video lottery terminals.
	Sec. 466.511.  VIDEO LOTTERY RETAILER OR VIDEO LOTTERY
	MANAGER LICENSE REQUIRED.  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.
	Sec. 466.512.  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
	originally granted by the Texas Racing Commission under the Texas
	Racing Act (Article 179e, Vernon's Texas Civil Statutes) on or
	before January 1, 2013, and the location for the video lottery
	terminal establishment must be in the county in which the license
	holder's racetrack was authorized to operate under that license;
	(2)  have a valid and executed contract with a
	racetrack or pari-mutuel license holder who satisfies the
	requirements of Subdivision (1) to act as a video lottery manager
	for the racetrack subject to licensing under this subchapter; or
	(3)  demonstrate to the commission's satisfaction that
	the applicant seeks to act as a video lottery manager for a
	federally recognized Indian tribe.
	(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 issue a video lottery retailer or
	manager license to an applicant who meets the criteria established
	by the commission rules.
	(d)  The commission shall adopt rules to implement this
	section.
	Sec. 466.513.  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.
	Sec. 466.514.  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)  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.
	(e)  A video lottery terminal establishment may be located
	only at the premises of a racetrack.
	(f)  Notwithstanding Subsections (a) and (b) and on request
	of an applicant for a video lottery terminal establishment license,
	the commission by rule shall authorize the applicant, on receipt of
	a license issued under this chapter to operate a video lottery
	terminal establishment at a racetrack that meets the requirements
	of Section 466.538, to construct temporary facilities to house and
	operate video lottery equipment for not more than two years. A
	racetrack that is granted a waiver described by Section 466.538(h)
	is considered to meet the requirements of Section 466.538 for
	purposes of this subsection.
	Sec. 466.515.  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. 466.516.  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
	of registration, 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 the retailer's racetrack or pari-mutuel license issued
	under the Texas Racing Act (Article 179e, Vernon's Texas Civil
	Statutes) unless 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. 466.517.  RULES FOR ADDITIONAL QUALIFICATIONS.  The
	commission by rule may establish other license, certificate of
	registration, finding of suitability, or approval qualifications
	the commission determines are in the public interest and consistent
	with the declared policy of this state.
	Sec. 466.518.  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. 466.519.  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. 466.520.  SUITABILITY FINDING.  To promote the
	integrity and security of the video lottery system, 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,
	certificate of registration, or approval from the commission for
	the person's video lottery-related operations.
	Sec. 466.521.  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 renders the license holder
	ineligible for a license under this subchapter;
	(3)  the license holder refuses to allow the
	commission, the commission's agents, the state auditor, or the
	state auditor's 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. 466.522.  LICENSING, REGISTRATION, SUITABILITY, AND
	REGULATORY APPROVAL AS REVOCABLE PERSONAL PRIVILEGES.  (a)  The
	purchaser or successor of a person who holds a license, certificate
	of 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)  Unless approved in advance by the commission, the
	license, certificate of registration, finding of suitability, or
	other affirmative regulatory approval of the holder is void on:
	(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.
	Sec. 466.523.  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. 466.524.  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 or other video
	lottery equipment 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. 466.525.  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. 466.526.  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. 466.527.  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
	or approval 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. 466.528.  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. 466.529.  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. 466.530.  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.
	Sec. 466.531.  TRAVEL AND INVESTIGATION COSTS.  The
	commission shall pay the travel and investigative expenses incurred
	under this subchapter from money appropriated to the commission.
	Sec. 466.532.  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 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. 466.533.  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,
	to:
	(1)  deny any application or limit, condition,
	restrict, revoke, or suspend any license, certificate of
	registration, finding of suitability, or other affirmative
	regulatory approval; and
	(2)  for cause fine any person licensed, registered,
	found suitable, or approved.
	Sec. 466.534.  INSTITUTIONAL INVESTOR.  The commission shall
	adopt rules regarding a finding of suitability for an institutional
	investor in a person licensed under this subchapter.
	Sec. 466.535.  EFFECT OF DENIAL OF LICENSE, CERTIFICATE OF
	REGISTRATION, FINDING OF SUITABILITY, OR APPROVAL.  (a)  A person
	whose application for a license, certificate of registration,
	finding of suitability, or other affirmative regulatory approval
	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,
	certificate of registration, finding of suitability, or other
	affirmative regulatory approval and a person denied a license,
	certificate of registration, finding of suitability, or other
	affirmative regulatory approval must be terminated immediately on
	receipt of notice from the commission. If the person denied a
	license, certificate of registration, finding of suitability, or
	other affirmative regulatory approval has previously been granted a
	temporary license, certificate of registration, finding of
	suitability, or other affirmative regulatory approval, the
	temporary license, certificate of registration, finding of
	suitability, or other affirmative regulatory approval expires
	immediately on denial of the permanent license, certificate of
	registration, finding of suitability, or other affirmative
	regulatory approval.
	(c)  Except as otherwise authorized by the commission, a
	person denied a license, certificate of registration, finding of
	suitability, or other affirmative regulatory approval may not
	reapply for any license, certificate of registration, finding of
	suitability, or other affirmative regulatory approval before the
	second anniversary of the date of the denial.
	Sec. 466.536.  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 downtime;
	(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. 466.537.  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 466.512(a)(1) is considered to meet the requirements of
	this section.
	Sec. 466.538.  LIVE RACING REQUIREMENT. (a) "Class 1
	racetrack," "class 2 racetrack," and "class 3 racetrack" have the
	meanings assigned by Section 6.02, Texas Racing Act (Article 179e,
	Vernon's Texas Civil Statutes).
	(b)  Except as provided by Subsection (d), a class 1
	racetrack that operates a video lottery terminal establishment:
	(1)  shall annually offer for pari-mutuel wagering on
	quarter horse and Thoroughbred races at that racetrack not fewer
	than the greater of:
	(A)  the number of live racing days conducted by
	the racetrack for each breed in 2002; or
	(B)  50 live race days or 500 live races for each
	breed; and
	(2)  may not conduct live racing on any day on which
	another horse racetrack located within a 100-mile radius of the
	racetrack conducts live racing for the same breed.
	(c)  Except as provided by Subsection (d), a class 2
	racetrack that operates a video lottery terminal establishment:
	(1)  shall annually offer for pari-mutuel wagering on
	quarter horse and Thoroughbred races at that racetrack not fewer
	than the greater of:
	(A)  the number of live racing days conducted by
	the racetrack for each breed in 2002; or
	(B)  25 live race days or 250 live races for each
	breed; and
	(2)  may not conduct live racing on any day on which
	another horse racetrack within a 100-mile radius of the racetrack
	conducts live racing for the same breed.
	(d)  A class 1 or class 2 racetrack may conduct fewer live
	racing days or live races than required by Subsection (b) or (c) for
	any breed if the racetrack, the applicable officially recognized
	breed registry, and the officially recognized horsemen's
	organization for that breed enter into a written agreement to
	conduct fewer racing days or live races.
	(e)  A class 2 or class 3 racetrack that operates a video
	lottery terminal establishment and that is located within a
	100-mile radius of a class 1 racetrack may not conduct a horse race
	in a manner that, for any breed, would result in:
	(1)  an average daily purse amount that exceeds the
	average daily purse amount at the immediately preceding race
	meeting for that breed at the class 1 racetrack unless otherwise
	agreed to by both racetracks; or
	(2)  total purse amounts for that race meeting that
	exceed the total purse amounts for the immediately preceding race
	meeting for that breed at the class 1 racetrack unless otherwise
	agreed to by both racetracks.
	(f)  A class 2 or class 3 racetrack subject to Subsection (e)
	shall transfer any purse money in the Texas equine development fund
	for that racetrack in excess of the maximum purse amounts
	authorized under Subsection (e) to the horsemen's organization for
	the same breed at the class 1 racetrack within the specified radius
	for use by the organization, unless the class 1 racetrack and the
	horsemen's organization agree to allow some or all of the excess
	purse money to be transferred and used for the same breed by the
	horsemen's organization at another racetrack or racetracks.
	(g)  A greyhound racetrack that operates a video lottery
	terminal establishment shall offer not fewer than 420 live
	greyhound racing performances in each calendar year, unless
	otherwise agreed to in writing by the racetrack and the officially
	recognized greyhound breed registry. For purposes of this
	subsection, "greyhound racing performance" means the consecutive
	running of not fewer than 12 greyhound races.
	(h)  The Texas Racing Commission shall adopt rules to
	implement this section, including rules governing waiver of the
	requirements of this section due to fire, weather, absence of
	existing facilities required to conduct pari-mutuel wagering on
	live racing, or other events beyond the reasonable control of the
	pari-mutuel license holder.  A waiver granted under this subsection
	for construction of a new racetrack facility:
	(1)  expires on the second anniversary of the date of
	issuance; and
	(2)  must include a provision that addresses the
	transfer of a portion of the revenue generated from the operation of
	the video lottery terminals as provided under this chapter to the
	applicable Texas equine development fund or Texas canine
	development fund during the term of the waiver.
	(i)  If a racetrack is in violation of this section and is
	denied a waiver of the requirements of this section by the Texas
	Racing Commission, the racing commission shall:
	(1)  require that, beginning on the date the request
	for the waiver is denied, the racetrack's share of net terminal
	income be placed in an escrow account and remain in that account
	until the racing commission approves its release; and
	(2)  provide for the timely release of money from the
	escrow account for required payments of debt instruments, license
	fees, and other ordinary operating expenses.
	(j)  The Texas Racing Commission may not approve the release
	of the remainder of the money in the escrow account after the
	payments authorized under Subsection (i)(2) until the racing
	commission certifies that, in the racing commission's judgment, the
	racetrack has taken the actions required by the racing commission
	to correct violations of this section. If the racing commission
	makes the certification before live racing resumes at the
	racetrack, it shall grant a waiver of the requirements of this
	section. The actions required by the racing commission to correct
	violations of this section must be a condition of the waiver and
	must include a period for completion of the specified actions. If
	the racetrack fails to adhere to the conditions of the waiver, the
	waiver is revoked.
	(k)  A racetrack is ineligible to hold a video lottery
	terminal establishment license under this subchapter if:
	(1)  the Texas Racing Commission denies a waiver of the
	requirements of this section;
	(2)  the denial is not reversed after all appeals of
	that decision by that racetrack are final; and
	(3)  the racetrack fails to take the actions required
	by the racing commission to correct violations of this section.
	Sec. 466.539.  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. 466.540.  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. 466.541.  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 or approved 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.
	Sec. 466.542.  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. 466.543.  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. 466.544.  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 each 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)  An individual who believes that he or she may be playing
	video lottery games on a compulsive basis may request that the
	individual'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. 466.545.  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 the date the video lottery
	retailer or video lottery manager acquires knowledge of the
	litigation.
	Sec. 466.546.  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.
	Sec. 466.547.  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. 466.548.  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. The report must provide the name, job title, date of
	birth, and social security number of each employee of the retailer
	or manager.
	(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
	compensated by an applicant or the holder of a license, certificate
	of registration, finding of suitability, or other affirmative
	regulatory approval under this subchapter as an agent, personal
	representative, consultant, or independent contractor for
	activities directly related to video lottery operations in this
	state.
	Sec. 466.549.  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. 466.550. SECURITY.  (a)  In addition to the security
	provisions applicable under Section 466.020, a video lottery
	retailer or video lottery manager shall institute security
	procedures to ensure that:
	(1)  all video lottery terminals are 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 are retained for at
	least 30 days and made available to the commission on request;
	(2)  access to video lottery terminal areas is
	restricted to persons who are at least 21 years of age;
	(3)  the video lottery retailer or video lottery
	manager provides 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 employs 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. 466.551.  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.
	Sec. 466.552.  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. 466.553.  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. 466.554.  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)  Notwithstanding Section 466.355(b), the commission
	may expend an amount not to exceed $5 million from the state lottery
	account to establish the video lottery system in accordance with
	this chapter and from revenue deposited in the state video lottery
	account may reimburse the state lottery account for the total
	amount of funds expended from the state lottery account to
	establish the video lottery system.  This subsection expires
	January 1, 2017.
	(b)  An amount specified in the General Appropriations Act
	and not to exceed one percent of the net terminal income received by
	this state under Section 466.555 shall be allocated to the
	commission to defray expenses incurred in administering this
	subchapter, including expenses incurred to operate the video
	lottery central system.
	Sec. 466.555.  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)  30 percent 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; 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)  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
	promote and facilitate the prosecution of offenses under Chapter
	47, Penal Code.
	(d)  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.
	(e)  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.
	(f)  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.
	(g)  The commission by rule shall establish procedures for:
	(1)  depositing money from video lottery terminal
	operations into electronic funds transfer accounts; and
	(2)  handling money from video lottery terminal
	operations.
	(h)  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 begins to accrue on the date payment is due to the
	commission.
	(i)  In the commission's sole discretion, rather than
	disable a license holder's video lottery terminals under Subsection
	(h), 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, on or before the 30th day after the date the license
	holder is notified of the violation, 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.
	(j)  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.
	(k)  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. 466.556.  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. 466.557.  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 delay 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. 466.558.  TRANSFERS OF VIDEO LOTTERY PROCEEDS FOR
	CERTAIN PURPOSES; RACING FACILITIES CAPITAL IMPROVEMENT ACCOUNT.
	(a)  A video lottery retailer or video lottery manager that operates
	a video lottery terminal establishment at a horse racetrack at
	least weekly shall transfer:
	(1)  11 percent of the net terminal income to the Texas
	equine development fund established at that racetrack; and
	(2)  one percent of the net terminal income to the
	performance horse development fund.
	(b)  A video lottery retailer or video lottery manager that
	operates a video lottery terminal establishment at a greyhound
	racetrack shall transfer 12 percent of the net terminal income to
	the Texas canine development fund established at that racetrack.
	(c)  A video lottery retailer or video lottery manager that
	operates a video lottery terminal establishment at a horse
	racetrack shall provide at least $1 million, or the minimum
	coverage amount required by the Texas Racing Commission, in
	accident insurance coverage for jockeys participating in a race
	meeting at its racetrack. The Texas Racing Commission:
	(1)  may review and approve the adequacy of the
	coverage;
	(2)  shall annually adjust for inflation the minimum
	coverage amount; and
	(3)  shall annually publish in the Texas Register the
	revised minimum coverage amount.
	(d)  A video lottery retailer or video lottery manager shall
	provide all necessary capital investments and required
	improvements for the video lottery terminal establishment.
	(e)  A video lottery retailer or video lottery manager shall
	make at least weekly payments to the racing facilities capital
	improvement account in an amount equal to 0.5 percent of the net
	terminal income unless a racing facilities agreement providing for
	a different amount is filed with the Texas Racing Commission.
	(f)  The racing facilities capital improvement account is a
	special escrow account held outside the state treasury and
	administered by the Texas Racing Commission without further
	appropriation. A transfer of money from the account requires:
	(1)  for a horse racetrack, the signatures of:
	(A)  a designated official of the horse racetrack;
	and
	(B)  a designated representative appointed by a
	majority of the quarter horse state breed registry, the
	Thoroughbred state horse breed registry, and the horsemen's
	organization; or
	(2)  for a greyhound racetrack, the signatures of:
	(A)  a designated official of the greyhound
	racetrack; and
	(B)  a designated representative of the Texas
	Greyhound Association.
	(g)  The Texas Racing Commission shall adopt rules to
	administer this section. The rules must require the electronic
	transfer of funds to the accounts described in this section.
	(h)  A matter considered by the Texas Racing Commission under
	this section is a contested case under Chapter 2001 and requires a
	public hearing.
	Sec. 466.559.  PAYMENTS FROM NET TERMINAL INCOME WHEN LIVE
	RACING DOES NOT OCCUR. (a) A video lottery retailer or video
	lottery manager shall promptly and fully make each payment or
	transfer from the net terminal income required under this
	subchapter on behalf of the video lottery terminal establishment at
	the racetrack even if live racing at that racetrack is shortened,
	canceled, or delayed for any reason.
	(b)  If a horse racetrack fails to request the minimum number
	of required live race dates or fails to offer the minimum number of
	required live races despite issuance of live race dates, does not
	receive a waiver of that violation from the Texas Racing Commission
	as provided under this subchapter, and does not have an agreement
	with the affected state horse breed registries and horsemen's
	organization, the applicable state horse breed registries and the
	horsemen's organization may, in their sole discretion, transfer all
	money to which they are entitled under this subchapter from that
	racetrack to the respective accounts under their control at another
	racetrack or racetracks.
	(c)  If a greyhound racetrack fails to request the minimum
	number of required live race dates or fails to offer the minimum
	number of required live races despite issuance of live race dates,
	does not receive a waiver of that violation from the Texas Racing
	Commission as provided under this subchapter, and does not have an
	agreement with the affected officially recognized greyhound breed
	registry, the Texas Greyhound Association may, in its sole
	discretion, transfer all money to which the association is entitled
	under this chapter from that racetrack to the account under its
	control at another racetrack or racetracks.
	Sec. 466.560.  EQUINE RESEARCH FUNDING; USES OF TEXAS CANINE
	DEVELOPMENT FUND OR TEXAS EQUINE DEVELOPMENT FUND AT EACH
	RACETRACK. (a) The amount equal to 0.025 percent of the net
	terminal income generated at a video lottery terminal establishment
	at a horse racetrack shall be transferred from the Texas equine
	development fund for that racetrack to the equine research account
	of the Texas Agricultural Experiment Station for use in equine
	research, including facilities development under Subchapter F,
	Chapter 88, Education Code. The money transferred under this
	subsection shall supplement, and may not replace, funding provided
	under the Texas Racing Act (Article 179e, Vernon's Texas Civil
	Statutes).
	(b)  Each video lottery retailer or video lottery manager
	that operates a video lottery terminal establishment at a racetrack
	shall, at least weekly, transfer to the racing facilities capital
	improvement account from the racetrack's Texas equine development
	fund or Texas canine development fund, as applicable, an amount
	equal to one-half of one percent of the net terminal income unless a
	racing facilities agreement providing for a different amount is
	filed with the Texas Racing Commission.
	(c)  Unless an agreement between the state horse breed
	registries and the horsemen's organization provides otherwise, and
	after any other allocations required by this subchapter, the
	remainder of the money deposited in the Texas equine development
	fund at a horse racetrack must:
	(1)  be used for purses and the Texas-bred incentive
	programs and may be used for other programs considered beneficial
	to the equine industry, including:
	(A)  equine retirement, adoption, and retraining
	programs;
	(B)  programs to test for banned
	performance-enhancing equine drugs, performance-enhancing drug
	testing research, and equipment and facilities of laboratories
	providing those services in this state; and
	(C)  other programs to improve the working
	environment in stable areas of racetracks; and
	(2)  be allocated as follows:
	(A)  an amount equal to 4.43 percent of the net
	terminal income to the horsemen's organization to supplement
	Thoroughbred racing purses;
	(B)  an amount equal to 2.385 percent of the net
	terminal income to the horsemen's organization to supplement
	quarter horse racing purses;
	(C)  an amount equal to 2.38 percent of the net
	terminal income to the Thoroughbred state horse breed registry; and
	(D)  an amount equal to 1.28 percent of the net
	terminal income to the quarter horse state horse breed registry.
	(d)  From the money allocated under Subsection (c)(2)(A),
	under an agreement between the Texas Arabian Breeders Association
	and the horsemen's organization, the horsemen's organization shall
	allocate a portion of the money for purses for the Arabian horse
	racing industry. The agreement must provide that not less than an
	amount equal to 0.199 percent of the net terminal income be
	allocated for Arabian horse racing purses.  If an agreement is not
	made, the horsemen's organization shall transfer to the Texas
	Arabian horse racing industry an amount equal to 0.199 percent of
	the net terminal income for Arabian horse racing purses.
	(e)  From the money allocated under Subsection (c)(2)(B),
	under an agreement between the Texas Paint Horse Breeders'
	Association and the horsemen's organization, the horsemen's
	organization shall allocate a portion of the money for purses for
	the paint horse racing industry.  If an agreement is not made, the
	horsemen's organization shall transfer to the paint horse racing
	industry an amount equal to 0.072 percent of the net terminal income
	for paint horse racing purses.
	(f)  From the money allocated under Subsection (c)(2)(C),
	under an agreement between the Texas Arabian Breeders Association
	and the Thoroughbred state horse breed registry, the registry shall
	allocate a portion of the money for the Arabian horse racing
	industry state-breed programs. The agreement must provide that not
	less than an amount equal to 0.107 percent of the net terminal
	income be allocated for Arabian state-breed programs. If an
	agreement is not made, the Thoroughbred state horse breed registry
	shall transfer to the Texas Arabian horse racing industry for
	state-breed programs an amount equal to 0.107 percent of the net
	terminal income.
	(g)  From the money allocated under Subsection (c)(2)(D),
	under an agreement between the Texas Paint Horse Breeders'
	Association and the quarter horse state horse breed registry, the
	registry shall allocate a portion of the money for state-breed
	programs for the paint horse racing industry.  If an agreement is
	not made, the registry shall transfer to the paint horse racing
	industry an amount equal to 0.038 percent of the net terminal income
	for paint horse state-breed programs.
	(h)  Following the other transfers and allocations required
	by this subchapter, the remainder of the money deposited in the
	Texas canine development fund at a greyhound racetrack is allocated
	as follows:
	(1)  an amount equal to 4.75 percent of the net terminal
	income to supplement greyhound racing purses;
	(2)  an amount equal to 4.75 percent of the net terminal
	income to supplement accredited Texas-bred greyhound purses; and
	(3)  an amount equal to two percent of the net terminal
	income to the Texas Greyhound Association as the state greyhound
	breed registry.
	(i)  The Texas Racing Commission may adopt rules to
	administer this section and shall require the electronic transfer
	of funds to the accounts described in this section.
	Sec. 466.561.  RACING FACILITIES AGREEMENT; LIMITATION ON
	USES OF RACING FACILITIES CAPITAL IMPROVEMENT ACCOUNT.  (a)  For
	purposes of Sections 466.558 and 466.560, a racing facilities
	agreement for a horse racetrack is valid only on approval of the
	applicable racetrack and a majority of the quarter horse state
	horse breed registry, the Thoroughbred state horse breed registry,
	and the horsemen's organization.
	(b)  For purposes of Sections 466.558 and 466.560, a racing
	facilities agreement for a greyhound racetrack is valid only on
	approval of the racetrack and the Texas Greyhound Association.
	(c)  A racing facilities agreement filed under Section
	466.558 or 466.560 remains in effect until it expires on its own
	terms or until it is superseded by a subsequent racing facilities
	agreement for the same racetrack.
	(d)  Unless a racing facilities agreement provides
	otherwise, the money in the racing facilities capital improvement
	account may be spent only for the maintenance and improvement of
	pari-mutuel racing facilities.
	Sec. 466.562.  USES OF PERFORMANCE HORSE DEVELOPMENT FUND.
	(a)  In this section, "performance and recreational horses" means
	horses bred or trained for public competition and exhibition or
	recreational use in all legally permitted equine activities other
	than horse racing at racetracks.
	(b)  Money in the performance horse development fund may be
	spent only for:
	(1)  the development of the horse agricultural industry
	in this state through efforts intended to attract, retain, promote,
	and encourage the breeding, raising, training, and exhibition of
	performance and recreational horses in this state; and
	(2)  events and programs conducted in this state.
	(c)  Money from the performance horse development fund is
	allocated as follows:
	(1)  40 percent to the American Quarter Horse
	Association for its sanctioned events and programs;
	(2)  20 percent to the National Cutting Horse
	Association for its sanctioned events and programs;
	(3)  20 percent to the American Paint Horse Association
	for its sanctioned events and programs; and
	(4)  20 percent to the Department of Agriculture to
	promote the equine agricultural industry in this state.
	(d)  Subject to Subsection (e), money transferred to an
	association or agency from the performance horse development fund
	may be used for:
	(1)  purse supplements or additional money for
	performance and recreational horses events conducted in this state;
	(2)  the establishment of an accredited Texas Bred
	Program for breeding of performance and recreational horses;
	(3)  the marketing and promotion of performance and
	recreational horses activities and events in this state; and
	(4)  scholarship programs.
	(e)  Money may be transferred under Subsection (c)(4) only to
	organizations of the equine industry in this state that are not
	receiving money for events and programs under Subsection (c)(1),
	(2), or (3).
	(f)  Except as otherwise provided by law, all money paid to
	the Department of Agriculture is subject to Subchapter F, Chapter
	404.
	Sec. 466.563.  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.
	(d)  The money derived from video lottery proceeds that is
	required under this subchapter to be transferred to the Texas
	equine development fund or the performance horse development fund
	is held in trust by the video lottery retailer or video lottery
	manager, as applicable, for the benefit of the persons designated
	in this subchapter to receive money from the funds.  On Wednesday of
	each week, the retailer or manager shall transfer the money accrued
	in the funds during the week ending on the preceding Saturday to the
	depository accounts maintained by the persons entitled to money
	from the funds under this subchapter. If the retailer or manager
	fails to transfer the money as required under this subsection, a
	person entitled to money from the funds under this subchapter may
	file a civil action against the retailer or manager for relief,
	including damages and specific performance.
	Sec. 466.564.  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. 466.565.  REVOCATION OF LICENSE, CERTIFICATE OF
	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, certificate of
	registration, suitability, or approval issued under this
	subchapter.
	Sec. 466.566.  HEARING FOR REVOCATION OR SUSPENSION.  (a)
	Before the commission revokes or suspends a video lottery terminal
	provider's registration or approval 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, certificate of registration,
	or approval 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 holder's position in
	response on or before the 15th day after the effective date of the
	revocation; and
	(5)  a statement explaining the holder'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.
	Sec. 466.567.  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. 466.568.  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 30.  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 31.  Section 467.021(a), Government Code, is amended
	to read as follows:
	(a)  The commission is composed of:
	(1)  three voting members appointed by the governor
	with the advice and consent of the senate; and
	(2)  the comptroller, who serves as an ex officio,
	nonvoting member.
	SECTION 32.  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 33.  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 34.  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 35.  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 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 36.  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 37.  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 (Pub. L. No. 100-497), 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 38.  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 39.  (a)  As soon as practicable after the
	constitutional amendment authorizing a state 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 games of chance on certain
	Indian lands proposed by the 83rd Legislature, Regular Session,
	2013, 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 2014-2015 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 466.554, Government Code, as added by this Act, to
	fund the establishment of the state video lottery system.
	(c)  If the proposed constitutional amendment is approved by
	the voters, the Texas Lottery Commission and the Texas Racing
	Commission shall adopt initial rules for purposes of implementing
	video lottery in accordance with Chapter 466, Government Code, as
	amended by this Act, not later than December 1, 2013. Chapter 2001,
	Government Code, does not apply to the adoption of those rules.
	Rules adopted under this section shall expire not later than
	September 1, 2016.
	(d)  Notwithstanding Chapter 466, Government Code, as
	amended by this Act, the Texas Lottery Commission may not issue a
	video lottery retailer or video lottery manager license to an
	applicant under that chapter unless the applicant, on or before
	September 1, 2013, pays to the commission an initial application
	fee in the following amount:
	(1)  for an applicant who holds a class 1 racetrack
	license, $25 million; or
	(2)  for an applicant who holds a class 2 or class 3
	horse racetrack license or a greyhound racetrack license, $15
	million.
	(e)  If the proposed constitutional amendment is not
	approved by the voters, the Texas Lottery Commission shall
	reimburse the full amount of the initial application fee paid by an
	applicant under Subsection (d) of this section not later than
	December 1, 2013.
	SECTION 40.  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 on the date 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 41.  Sections 1 through 38 and 40 of this Act take
	effect on the date the constitutional amendment authorizing a state
	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 games
	of chance on certain Indian lands proposed by the 83rd Legislature,
	Regular Session, 2013, becomes effective.  Section 39 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 39 of
	this Act and this section take effect September 1, 2013.