80R10676 YDB-F
	By: Flores	H.B. No. 3326

	A BILL TO BE ENTITLED
	AN ACT
	relating to authorizing the operation of video lottery games by
	licensed horse and greyhound racetrack operators, to 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.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1.  Section 466.002, Government Code, is amended by
	amending Subdivisions (2) through (10) and adding Subdivisions (11)
	through (36) to read as follows:
	(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)  "Director" means a [the] director employed by the
	executive director under Section 467.033 [of the division].
	(4)  "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.
	(5)  "Distribute," with respect 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, including on Indian lands in this
	state, means the sale, lease, marketing, offer, or other
	disposition of any of those items.
	(6) [(3)]  "Division" means the lottery division
	established by the commission under Chapter 467.
	(7)  "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.
	(8) [(4)]  "Executive director" means the executive
	director of the commission.
	(9)  "Gaming agreement" means an agreement authorized
	under Subchapter K between this state and a federally recognized
	Indian tribe under which this state allows the tribe to conduct
	limited gaming activities authorized under this chapter or
	applicable federal law.
	(10)  "House-banked game" means a game of chance in
	which:
	(A)  the house plays as a participant;
	(B)  the house competes against all players,
	collects from all losers, and pays all winners; and
	(C)  the house has an opportunity to win.
	(11)  "Indian lands" means land on which video lottery
	games may be conducted by an Indian tribe under Section 47(f)(2) or
	(3), Article III, Texas Constitution.
	(12)  "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
	Rule 144A, Securities Act of 1933 (15 U.S.C. Sections 77a-77aa),
	and the rules and regulations 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. Sections 78a-78kk), and
	the rules and regulations 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-1 et seq.);
	(iii)  an investment company registered
	under Section 8, Investment Company Act of 1940 (15 U.S.C. Section
	80a-1 et seq.);
	(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 Securities and Exchange Commission;
	(v)  a group composed entirely of persons
	specified by this subdivision; or
	(vi)  any other person the commission
	recognizes as an institutional investor for reasons consistent with
	the policies expressed in this chapter.
	(13) [(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].
	(14) [(6)]  "Lottery game" means an activity conducted
	lawfully and 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].
	(15) [(7)]  "Lottery operator" means a person selected
	under Section 466.014(b) to operate a lottery game.
	(16)  "Manufacture," with respect 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, including on Indian lands in this
	state, means to design, assemble, fabricate, produce, program, or
	make modifications to any of those items.
	(17)  "Net terminal income" means the total amount of
	money paid to play video lottery games less the value of all credits
	redeemed, including any progressive prizes and bonuses, by the
	players of the video lottery games.  Promotional prizes unrelated
	to video lottery game wagers that are offered by a video lottery
	retailer or video lottery manager may not be deducted or otherwise
	considered credits redeemed for money by players for the purpose of
	determining net terminal income.
	(18)  "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).
	(19)  "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.
	(20) [(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.
	(21)  "Racetrack" means a racetrack as defined by
	Section 1.03(25), Texas Racing Act (Article 179e, Vernon's Texas
	Civil Statutes).
	(22) [(9)]  "Sales agent" or "sales agency" means a
	person licensed under this chapter to sell tickets.
	(23)  "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.
	(24)  "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.
	(25) [(10)]  "Ticket" means any tangible evidence
	issued to provide participation in a lottery game authorized by
	this chapter other than a video lottery game.
	(26)  "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.
	(27)  "Video lottery central system provider" means a
	person that, under a contract with the commission, provides the
	video lottery central system.
	(28)  "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.
	(29)  "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.
	(30)  "Video lottery manager" means a person who:
	(A)  is licensed by the commission under this
	chapter to manage a video lottery terminal establishment at a
	racetrack; or
	(B)  provides management services for a video
	lottery terminal establishment on Indian lands.
	(31)  "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.
	(32)  "Video lottery system" has the meaning assigned
	to that term by Section 47(f), Article III, Texas Constitution.
	(33)  "Video lottery terminal" means  an interactive
	electronic device that is capable of displaying video lottery
	games.
	(34)  "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 or a gaming agreement.
	(35)  "Video lottery terminal provider" means a person
	in the business of manufacturing or distributing video lottery
	terminals in this state.
	(36)  "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 2.  Section 466.003, Government Code, is amended by
	amending Subsection (b) and adding Subsection (c) 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.
	(c)  Notwithstanding Subsection (a), if any gaming agreement
	that allows video lottery is in effect, the commission or another
	state agency designated by the legislature must regulate video
	lottery games as necessary to comply with a gaming agreement under
	this chapter.
	SECTION 3.  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 4.  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 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 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 approval under Subchapter K.
	SECTION 5.  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 6.  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 that requires the accountant to express an 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 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.
	SECTION 7.  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 8.  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 9.  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 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 that:
	(1)  are furnished to the commission under Subchapter K
	or that may be otherwise obtained by the commission from any source;
	(2)  pertain to an applicant's criminal record,
	antecedents, and background and are furnished to or obtained by the
	commission from any source, including information obtained by the
	commission under Section 411.108(d);
	(3)  are 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;
	(4)  are obtained by the commission from a video
	lottery manager, video lottery retailer, video lottery terminal
	provider, or video lottery central system provider; or
	(5)  are prepared or obtained by an agent or employee of
	the commission relating to a license, registration, or renewal
	application, a finding of suitability, or any approval required
	under Subchapter K.
	(d)  Information that qualifies as confidential under
	Subsection (b)(4) may be disclosed in whole or in part 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 10.  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, slot [or]
	machine, or other gambling device that is not connected to the video
	lottery central system and regulated by this state as required by
	Section 47, Article III, Texas Constitution, and this chapter is
	prohibited.
	(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 11.  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 12.  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 deemed unsuitable to be a video
	lottery terminal provider under Subchapter K.
	SECTION 13.  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 14.  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, Sections
	466.020 and 466.201, and Subchapter K, 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, which shall consider a criminal history investigation conducted
	under the Texas Racing Act (Article 179e, Vernon's Texas Civil
	Statutes).
	SECTION 15.  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 16.  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 17.  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, 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 does not generate revenue for this
	state, except funds retained by the commission to pay
	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 18.  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 19.  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 20.  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 21.  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 22.  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 23.  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 24.  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.
	(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 25.  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 26.  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 27.  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 28.  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 47(f), 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 for the operation of video lottery
	terminals on certain Indian lands as defined by the Texas
	Constitution, 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 required by federal law governing 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, 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 and to certain lands and 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 slot machines, 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 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.
	(c)  Video lottery equipment operated under commission
	authority and this subchapter is exempt from 15 U.S.C. Section
	1172.
	Sec. 466.505.  AUTHORITY TO OPERATE VIDEO LOTTERY SYSTEM.
	(a)  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). This subchapter
	supersedes any conflicting or inconsistent provision of the Texas
	Racing Act (Article 179e, Vernon's Texas Civil Statutes) or other
	state law.
	(b)  The commission may allow the operation of video lottery
	terminals pursuant to this subchapter at locations on Indian lands
	in accordance with an effective gaming agreement and in compliance
	with applicable federal law.
	Sec. 466.506.  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. 466.507.  STATE CONTROL OF VIDEO LOTTERY SYSTEM.  (a)
	In accordance with Section 47(f), 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. 466.510.  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 video
	lottery terminal provider or an applicant applying for registration
	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. 466.511.  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 license as a video lottery
	terminal provider under this section.
	(b)  Unless suspended or revoked, the 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 commission approval
	as required by this section, an applicant must satisfy all
	applicable requirements under this subchapter.
	Sec. 466.512. 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 registration or other commission
	approval has been granted.
	(d)  The applicant shall comply with all federal and state
	laws, local ordinances, and rules.
	Sec. 466.513.  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 licensing video lottery terminals.
	(b)  Application fees paid under this section shall be
	retained by the commission and may be used only to defray costs
	incurred in the administration and enforcement of this chapter
	relating to the operation of video lottery terminals.
	Sec. 466.520.  VIDEO LOTTERY RETAILER OR VIDEO LOTTERY
	MANAGER LICENSE REQUIRED.  (a)  Except as provided by a gaming
	agreement, 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.
	(b)  Unless suspended or revoked, a video lottery retailer
	license expires on the same date the retailer's racetrack or
	pari-mutuel license issued under the Texas Racing Act (Article
	179e, Vernon's Texas Civil Statutes) expires.
	Sec. 466.521.  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
	granted by the Texas Racing Commission under the Texas Racing Act
	(Article 179e, Vernon's Texas Civil Statutes);
	(2)  have a valid and executed contract with a
	racetrack that satisfies the requirements of Subdivision (1) to act
	as a video lottery manager for the racetrack subject to licensing
	under this subchapter;
	(3)  demonstrate to the commission's satisfaction that
	the applicant seeks to act as a video lottery manager for a
	federally recognized Indian tribe that has entered into a gaming
	agreement with this state that is in effect and governs the
	regulation of video lottery terminals on Indian lands in this
	state;
	(4)  have had an application pending at the Texas
	Racing Commission for a racetrack or pari-mutuel license under the
	Texas Racing Act (Article 179e, Vernon's Texas Civil Statues) on
	January 1, 2007; or
	(5)  have been determined by the Texas Racing
	Commission or its designee to be qualified to hold a racetrack or
	pari-mutuel license under the Texas Racing Act (Article 179e,
	Vernon's Texas Civil Statutes).
	(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 adopt rules to implement this
	section.
	(d)  The commission shall issue a video lottery retailer or
	manager license to an applicant who meets the criteria established
	by the commission rules.
	(e)  The commission may not accept or consider an application
	under this section unless the applicant files with the application
	an estimate determined by the commission of the amount the retailer
	or manager would be required to allocate under Sections 466.593(a)
	through (c) in the first year of operation as a video lottery
	retailer.
	Sec. 466.522.  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. 466.525.  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)  The commission may not issue a video lottery terminal
	establishment license to a racetrack if a property line of the
	licensed premises of the racetrack is located within one-half mile
	of the property line of a public school.  This subsection does not
	apply to a racetrack that was located within one-half mile of a
	public school on the first day racing operations commenced at the
	racetrack.
	(e)  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.
	(f)  A video lottery terminal establishment may be located
	only at the premises of a licensed racetrack or on Indian lands.
	Sec. 466.526.  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. 466.527.  LICENSE TERM; RENEWAL ELIGIBILITY.  (a)
	Unless suspended or revoked, a license issued under this
	subchapter, other than a video lottery retailer license, expires on
	the date specified in the license, 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 a racetrack or pari-mutuel license and until 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, an applicant
	must satisfy all applicable licensing requirements under this
	subchapter.
	Sec. 466.528.  RULES FOR ADDITIONAL LICENSE QUALIFICATIONS.
	The commission by rule may establish other license qualifications
	the commission determines are in the public interest and consistent
	with the declared policy of this state.
	Sec. 466.529.  APPLICATION AS REQUEST FOR CHARACTER
	DETERMINATION.  An application under this subchapter to receive or
	renew a license, registration, or approval or to be found suitable
	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. 466.530.  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,
	or other 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. 466.531.  SUITABILITY FINDING.  To promote the
	integrity and security of the lottery, 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,
	registration, or approval from the commission for the person's
	video lottery-related operations.
	Sec. 466.532.  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 would render the license
	holder ineligible for a license under this subchapter;
	(3)  the license holder refuses to allow the
	commission, the commission's agents, or the state auditor, or their
	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. 466.533.  LICENSING, REGISTRATION, SUITABILITY, AND
	REGULATORY APPROVAL AS REVOCABLE PERSONAL PRIVILEGES.  (a)  The
	purchaser or successor of a person who holds a license,
	registration, suitability, or other affirmative regulatory
	approval under this subchapter must independently qualify for a
	license, registration, suitability, or approval required by this
	subchapter.
	(b)  The following acts void the license, registration,
	suitability, or other regulatory approval of the holder unless
	approved in advance by the commission:
	(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. 466.535.  CAPITAL INVESTMENTS AND IMPROVEMENT
	REQUIREMENTS FOR VIDEO LOTTERY TERMINAL ESTABLISHMENT.  A video
	lottery retailer or video lottery manager shall provide all
	necessary capital investments and required improvements at a video
	lottery terminal establishment operated by the retailer or manager.
	Sec. 466.536.  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. 466.537.  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 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. 466.538.  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. 466.539.  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 or a 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. 466.540.  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
	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. 466.541.  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. 466.542.  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 a gaming agreement or 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. 466.543.  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. 466.5455.  TRAVEL AND INVESTIGATION COSTS.  The
	commission shall pay the travel and investigative expenses incurred
	under this subchapter from money appropriated to the commission.
	Sec. 466.546.  CONSENT TO COMMISSION DETERMINATION.  (a)  An
	application for a license, registration, finding of suitability, or
	other 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 specifically 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. 466.547.  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,
	Government Code, to:
	(1)  deny any application or limit, condition,
	restrict, revoke, or suspend any license, registration, or finding
	of suitability or approval; and
	(2)  fine any person licensed, registered, found
	suitable, or approved for cause.
	Sec. 466.548.  INSTITUTIONAL INVESTOR.  The commission shall
	adopt rules regarding a finding of suitability for an institutional
	investor in a person licensed under this subchapter.
	Sec. 466.551.  EFFECT OF DENIAL OF LICENSE OR REGISTRATION.
	(a)  A person whose application for a license or registration 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 or
	registration and a person denied a license or registration must be
	terminated immediately on receipt of notice from the commission.
	If the person denied a license or registration has previously been
	granted a temporary license or registration, the temporary license
	or registration expires immediately on denial of the permanent
	license or registration.
	(c)  Except as otherwise authorized by the commission, a
	person denied a license or registration may not reapply for any
	license or registration before the second anniversary of the date
	of the denial.
	Sec. 466.553.  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 down-time;
	(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. 466.554.  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 466.521(a)(1) or (5) is considered to meet the
	requirements of this section.
	Sec. 466.556.  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. 466.557.  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. 466.558.  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 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. 466.560.  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. 466.561.  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. 466.562.  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 a 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)  A person who believes the person may be playing video
	lottery games on a compulsive basis may request that the person'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. 466.563.  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 acquiring knowledge of the
	litigation.
	Sec. 466.564.  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. 466.566.  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. 466.567.  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. For each employee of the retailer or manager, the report
	must provide the employee's name, job title, date of birth, and
	social security number.
	(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, permit, or approval
	or for any other reason the commission finds appropriate, including
	a refusal by a regulatory authority to issue a license, permit, or
	other 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
	connected directly with or compensated by an applicant or license
	holder as an agent, personal representative, consultant, or
	independent contractor for activities directly related to video
	lottery operations in this state.
	Sec. 466.568.  REPORT OF VIOLATIONS.  A person who holds a
	license or registration under this subchapter shall immediately
	report a violation or suspected violation of this chapter or a rule
	adopted under this chapter by any license or registration holder,
	by an employee of a license or registration holder, or by any person
	on the premises of a video lottery terminal establishment, whether
	or not associated with the license or registration holder.
	Sec. 466.569. SECURITY.  (a)  In addition to the security
	provisions applicable under Section 466.020, a video lottery
	retailer or video lottery manager shall comply with the following
	security procedures:
	(1)  all video lottery terminals must be 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 shall be retained
	for at least 30 days and made available to the commission on
	request;
	(2)  access to video lottery terminal areas shall be
	restricted to persons who are at least 21 years of age;
	(3)  the video lottery retailer or video lottery
	manager must provide 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 shall employ 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. 466.570.  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. 466.587.  INDEMNIFICATION REQUIREMENTS.  A license or
	registration holder 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 a
	license or registration holder, the commission, this state, and the
	members, officers, employees, and authorized agents of this state
	or the commission arising from the license or registration holder's
	participation in the video lottery system authorized under this
	subchapter.
	Sec. 466.588.  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. 466.589.  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)  Except as provided by Subsection (b), all revenue
	received by this state from the operation of the video lottery
	system shall be distributed solely to reimburse the commission
	until the $5 million authorized under this subsection is repaid to
	the state lottery account.  From funds previously appropriated to
	the commission for the state fiscal biennium ending August 31,
	2009, and notwithstanding Section 466.355(b), the commission is
	authorized to expend an amount not to exceed $5 million from the
	state lottery account during that biennium to establish the video
	lottery system in accordance with this chapter.  From revenue
	deposited in the state video lottery account during that biennium,
	the commission is hereby appropriated the amount necessary to
	reimburse the state lottery account for the total amount of funds
	expended to establish the video lottery system from the
	appropriation to the state lottery account, and the commission
	shall deposit that amount to the state lottery account.  This
	subsection expires January 1, 2011.
	(b)  An amount not to exceed two percent of the net terminal
	income received by this state under Section 466.590 shall be
	allocated to the commission to defray expenses incurred in
	administering this chapter related to video lottery, including
	expenses incurred to operate the video lottery central system. All
	money allocated to the commission under this subsection may be
	retained by the commission to defray expenses of administering this
	chapter related to video lottery and shall be deposited in the state
	video lottery account.
	Sec. 466.590.  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)  a portion 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 in an amount equal to 35
	percent of the net terminal income for that year; and
	(2)  the remainder shall be retained by the video
	lottery retailer or video lottery manager.
	(b)  Net terminal income derived from the operation of video
	lottery terminals on Indian lands under a gaming agreement
	authorized under this subchapter shall be distributed as set forth
	in the gaming agreement, provided that the agreement must provide
	that this state shall receive no more than 10 percent of the net
	terminal income.
	(c)  Ten million dollars of the net terminal income received
	by this state under Subsections (a) and (b) 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.
	(d)  One-quarter of one percent of the net terminal income
	received by this state under Subsections (a) and (b) shall be
	transferred to the Equine Research Program at the College of
	Veterinary Medicine at Texas A&M University for use in equine
	research under Subchapter F, Chapter 88, Education Code.
	(d-1)  Ten million dollars of the net terminal income
	received by this state under Subsections (a) and (b) 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 be used to prosecute offenses under
	Chapter 47, Penal Code.
	(d-2)  Two percent of the net terminal income received by
	this state under Subsections (a) and (b) shall be used to fund the
	performance horse development fund, administered by the Texas
	Racing Commission to fund a broad spectrum of the horse industry
	outside the racing industry and to develop the agriculture industry
	in this state.  Money from the fund is allocated annually as
	follows:
	(1)  40 percent of the fund to American Quarter Horse
	Association sanctioned events;
	(2)  20 percent to National Cutting Horse Association
	sanctioned events;
	(3)  20 percent to American Paint Horse sanctioned
	events; and
	(4)  20 percent to the Department of Agriculture to
	promote the agricultural industry in this state.
	(d-3)  The Texas Racing Commission may adopt rules to
	administer this section.
	(e)  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.
	(f)  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.
	(g)  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.
	(h)  The commission by rule shall establish the procedures
	for:
	(1)  depositing money from video lottery terminal
	operations into electronic funds transfer accounts; and
	(2)  handling money from video lottery terminal
	operations.
	(i)  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 shall begin to accrue on the date payment is due to the
	commission.
	(j)  In the commission's sole discretion, rather than
	disable a license holder's video lottery terminals under Subsection
	(i), 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, within 30 days, 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.
	(k)  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.
	(l)  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. 466.591.  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. 466.592.  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 delays 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. 466.593.  DEDUCTIONS FROM VIDEO LOTTERY PROCEEDS AT
	RACETRACKS. (a)  The pari-mutuel license holder that owns or
	operates a racetrack at which video lottery games are conducted
	under this subchapter and the officially recognized horsemen's
	organization representing the horsemen at the racetrack or the
	state breed registry representing the greyhound breeders at the
	racetrack shall enter into a written agreement to allocate a
	percentage of net terminal income retained by the license holder to
	be used for purses, accredited Texas Bred Incentive programs, and
	administrative costs.
	(b)  Unless otherwise agreed to under Subsection (a) by the
	pari-mutuel license holder that owns or operates a horse racetrack
	at which video lottery games are conducted under this subchapter
	and the officially recognized horsemen's organization representing
	the horsemen at the racetrack, the license holder shall allocate a
	percentage determined by the Texas Racing Commission of the net
	terminal income generated from the operation of video lottery
	terminals at the racetrack to purses.  The percentage must be
	sufficient to ensure the purses at the racetrack are nationally
	competitive and may not be less than 6.5 percent of the net terminal
	income generated from the operation of terminals at the racetrack.
	(c)  Unless otherwise agreed to under Subsection (a) by the
	pari-mutuel license holder that owns or operates a greyhound
	racetrack at which video lottery games are conducted under this
	subchapter and the state breed registry representing the greyhound
	breeders at the racetrack, the license holder shall allocate a
	percentage determined by the Texas Racing Commission of the net
	terminal income generated from the operation of video lottery
	terminals at the racetrack to purses.  The percentage must be
	sufficient to ensure the purses at the racetrack are nationally
	competitive and may not be less than 6.5 percent of the net terminal
	income generated from the operation of terminals at the racetrack.
	(d)  The Texas Racing Commission shall adopt rules to
	administer this section.  A matter considered by the commission
	under this section is a contested case under Chapter 2001,
	Government Code, and requires a public hearing.
	(e)  The state breed registry may allocate up to 50 percent
	of the amount received under Subsection (c) for Texas breeder
	awards.
	Sec. 466.595.  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.
	Sec. 466.596.  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. 466.597.  REVOCATION OF LICENSE, REGISTRATION, OR OTHER
	REGULATORY APPROVAL.  (a)  The commission shall revoke or suspend a
	license, registration, or other regulatory approval issued under
	this subchapter if the holder of the license, registration, or
	approval 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, registration,
	or other approval issued under this subchapter may be grounds for
	suspension or revocation, or both, of a license, registration, or
	other approval issued under this subchapter.
	Sec. 466.598.  HEARING FOR REVOCATION OR SUSPENSION OF
	REGISTRATION OR LICENSE.  (a)  Before the commission revokes or
	suspends a video lottery terminal provider's registration 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 or
	registration 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 license or
	registration holder's position in response on or before the 15th
	day after the effective date of the revocation; and
	(5)  a statement explaining the person'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. 466.601.  LIMITED WAIVER OF SOVEREIGN IMMUNITY; NO
	LIABILITY OF STATE FOR ENFORCEMENT.  (a)  This state does not waive
	its sovereign immunity by negotiating gaming agreements with Indian
	tribes or other persons for the operation of video lottery
	terminals or other lottery games under this chapter. An actor or
	agent on behalf of this state does not have any authority to waive
	the state's sovereign immunity absent an express legislative grant
	of the authority. The only waiver of sovereign immunity relative to
	video lottery terminal operations is that expressly provided for in
	this section.
	(b)  With regard to video lottery terminal operations on
	Indian lands, this state consents to the jurisdiction of the
	District Court of the United States with jurisdiction in the county
	where the Indian lands are located, or if the federal court lacks
	jurisdiction, to the jurisdiction of a district court in Travis
	County, solely for the purpose of resolving disputes arising from a
	gaming agreement authorized under this subchapter for declaratory
	or injunctive relief or contract damages of $100,000 or more. Any
	disputes relating to damages or other awards valued at less than
	$100,000 shall be arbitrated under the rules of the American
	Arbitration Association, provided, however, that application of
	the rules may not be construed as a waiver of sovereign immunity.
	(c)  All financial obligations of the commission are payable
	solely out of the income, revenues, and receipts of the commission
	and are subject to statutory restrictions and appropriations.
	(d)  This state and the commission are not liable if
	performance by the commission is compromised or terminated by acts
	or omissions of the legislature or the state or federal judiciary.
	(e)  This state and the commission are not liable related to
	any enforcement of this chapter.
	Sec. 466.602.  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 license or registration holder or
	holder of a 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. 466.603.  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.
	Sec. 466.604.  MODEL GAMING AGREEMENT.  (a)  The governor
	shall execute, on behalf of this state, a gaming agreement with the
	Ysleta del Sur Pueblo Indian tribe, the Alabama-Coushatta Indian
	tribe, or the Kickapoo Traditional Tribe of Texas containing the
	terms set forth in Subsection (b), as a ministerial act, without
	preconditions, not later than the 30th day after the date the
	governor receives a request from the tribe, accompanied by or in the
	form of a duly enacted resolution of the tribe's governing body, to
	enter into the gaming agreement.
	(b)  A gaming agreement executed under Subsection (a) must be
	in the form and contain the provisions as follows:
	GAMING AGREEMENT GOVERNING
	VIDEO LOTTERY TERMINAL OPERATIONS
	Between the [Name of Tribe]
	and the STATE OF TEXAS
	This agreement is made and entered into by and between the
	[Name of Tribe], a federally recognized Indian Tribe ("Tribe"), and
	the State of Texas ("State"), with respect to the operation of video
	lottery terminals (as defined by Section 466.002, Texas Government
	Code) on the Tribe's Indian lands (as defined by Chapter 466, Texas
	Government Code).
	SECTION 1.0.  TITLE.
	Sec. 1.1.  This document shall be referred to as "The [Name
	of Tribe] and State of Texas gaming agreement."
	SECTION 2.0.  PURPOSES AND OBJECTIVES.
	Sec. 2.1.  The terms of this agreement are designed and
	intended to:
	(a)  evidence the good will and cooperation of  the Tribe and
	State in fostering a mutually respectful government-to-government
	relationship that will serve the mutual interests of the parties;
	(b)  develop and implement a means of regulating limited
	Class III gaming on the Tribe's Indian lands to ensure fair and
	honest operation in accordance with the applicable federal and
	state law, and, through that regulated limited Class III gaming,
	enable the Tribe to develop self-sufficiency, promote tribal
	economic development, and generate jobs and revenues to support the
	Tribe's government and governmental services and programs; and
	(c)  ensure fair operation of video lottery games and
	minimize the possibilities of corruption and infiltration by
	criminal influences; promote ethical practices in conjunction with
	that gaming, through the licensing and control of persons employed
	in, or providing goods and services to, the Tribe's video lottery
	operation and protecting against the presence or participation of
	persons whose criminal backgrounds, reputations, character, or
	associations make the persons unsuitable for participation in
	gaming, thereby maintaining a high level of integrity in government
	gaming.
	SECTION 3.0.  DEFINITIONS.
	As used in this agreement, all terms have the meaning
	assigned by Section 466.002, Texas Government Code, unless
	otherwise specified:
	Sec. 3.1.  "Class III gaming" means the forms of Class III
	gaming defined in 25 U.S.C. Section 2703(8) and by regulations of
	the National Indian Gaming Commission.
	Sec. 3.2.  "Financial source" means any person providing
	financing, directly or indirectly, to the Tribe's video lottery
	terminal establishment or operation of video lottery terminals
	authorized under this gaming agreement.
	Sec. 3.3.  "Gaming activities" means the limited Class III
	gaming activities authorized under this gaming agreement.
	Sec. 3.4.  "Gaming employee" means any person who:
	(a)  operates, maintains, repairs, or assists in any gaming
	activities, or is in any way responsible for supervising the gaming
	activities or persons who conduct, operate, account for, or
	supervise the gaming activities;
	(b)  is in a category under applicable federal or tribal
	gaming law requiring licensing;
	(c)  is an employee of the Tribal Compliance Agency with
	access to confidential information; or
	(d)  is a person whose employment duties require or authorize
	access to areas of the video lottery terminal establishment that
	are not open to the public.
	Sec. 3.5.  "Gaming ordinance" means a tribal ordinance or
	resolution authorizing the conduct of Class III Gaming Activities
	on the Tribe's Indian lands and approved under IGRA or other
	applicable federal law.
	Sec. 3.6.  "IGRA" means the Indian Gaming Regulatory Act of
	1988 (18 U.S.C. Sec. 1166 et seq. and 25 U.S.C. Sec. 2701 et seq.),
	any amendments to the act, and all regulations promulgated under
	the act.
	Sec. 3.7.  "Key employee" means any person employed by the
	Tribe as chief operating or executive officer, chief financial
	officer, chief of security, or manager of a video lottery terminal
	establishment or operations of video lottery terminals, or any
	other person who may directly influence the management of a video
	lottery terminal establishment or the operation of video lottery
	terminals.
	Sec. 3.8.  "NIGC" means the National Indian Gaming
	Commission.
	Sec. 3.9.  "Patron" means any person who is on the premises
	of a video lottery terminal establishment, for the purpose of
	playing a video lottery game authorized by this gaming agreement.
	Sec. 3.10.  "Principal" means, with respect to any entity,
	the entity's sole proprietor or any partner, trustee, beneficiary,
	or shareholder holding 10 percent or more of the entity's
	beneficial or controlling ownership, either directly or
	indirectly, or more than 10 percent of the voting stock of a
	publicly traded corporation, or any officer, director, principal
	management employee, or key employee of the entity.
	Sec. 3.11.  "Restoration Act" means the Ysleta del Sur
	Pueblo and Alabama and Coushatta Indian Tribes of Texas Restoration
	Act (25 U.S.C. Section 731 et seq. and 25 U.S.C. Section 1300g et
	seq.).
	Sec. 3.12.  "State" means the State of Texas or an authorized
	official or agency of the state.
	Sec. 3.13.  "Texas regulatory commission" means the state
	agency that regulates video lottery games in Texas under Chapter
	466, Texas Government Code.
	Sec. 3.14.  "Transfer agreement" means a written agreement
	authorizing the transfer of video lottery terminal operating rights
	between the Tribe and another Indian tribe.
	Sec. 3.15.  "Transfer notice" means a written notice that
	the Tribe must provide to the Texas regulatory commission of the
	Tribe's intent to acquire or transfer video lottery terminal
	operating rights pursuant to a transfer agreement.
	Sec. 3.16.  "Tribal chairperson" means the person duly
	elected or selected under the Tribe's organic documents, customs,
	or traditions to serve as the primary spokesperson for the Tribe.
	Sec. 3.17.  "Tribal Compliance Agency" ("TCA") means the
	Tribal governmental agency that has the authority to carry out the
	Tribe's regulatory and oversight responsibilities under this
	gaming agreement. Unless and until otherwise designated by the
	Tribe, the TCA shall be the [Name of Tribe] Gaming Commission. A
	gaming employee may not be a member or employee of the TCA. The
	Tribe has the ultimate responsibility for ensuring that the TCA
	fulfills its responsibilities under this gaming agreement. The
	members of the TCA are subject to background investigations and
	shall be licensed to the extent required by any applicable Tribal or
	federal law and in accordance with this gaming agreement. The Tribe
	shall ensure that all TCA officers and agents are qualified for the
	position and receive ongoing training to obtain and maintain skills
	sufficient to carry out their responsibilities in accordance with
	industry standards.
	Sec. 3.18.  "Tribal law enforcement agency" means a police
	or security force established and maintained by the Tribe under the
	Tribe's powers of self-government to carry out law enforcement
	duties at or in connection with a video lottery terminal
	establishment.
	Sec. 3.19.  "Tribal gaming license" means any license issued
	by the TCA as required by and in compliance with this agreement.
	Sec. 3.20.  "Tribe" means [Name of Tribe], a federally
	recognized Indian tribe.
	Sec. 3.21.  "Video lottery terminal establishment" means any
	premises at which the operation of video lottery terminals is
	authorized under this gaming agreement.
	SECTION 4.0.  RECITALS.
	Sec. 4.1.  This agreement governs all operations of video
	lottery terminals as defined by Section 466.002, Texas Government
	Code, on the Tribe's Indian lands.
	Sec. 4.2.  A principal goal of Federal Indian policy is to
	promote tribal economic development and tribal self-sufficiency.
	The State and the Tribe find the goal to be consistent with
	applicable federal law, state public policy, and the public health,
	safety, and welfare to regulate video lottery terminals on Indian
	lands in accordance with this gaming agreement.
	Sec. 4.3.  The Tribe is a federally recognized Indian tribe
	possessing sovereign powers and rights of self-government. The
	Tribe's governing body has authorized the officials of the Tribe to
	enter into contracts and agreements of every description, including
	this gaming agreement, with the State.
	Sec. 4.4.  The Tribe exercises governmental authority within
	the [name of Reservation] (the "Reservation"), which for purposes
	of this gaming agreement means those lands within the current
	boundaries of the Reservation and any other Indian lands over which
	the Tribe exercises governmental authority.
	Sec. 4.5.  The State of Texas is a state of the United States
	of America possessing the sovereign powers and rights of a state.
	The State has a legitimate sovereign interest in regulating the
	growth of Class III gaming activities in Texas. Mindful of that
	interest, the State of Texas, pursuant to Chapter 466, Texas
	Government Code, authorized certain gaming agreements with Indian
	tribal governments in the State of Texas to permit the operation of
	video lottery terminals on Indian lands. It is the general policy
	of the State to prohibit commercial gambling throughout the state.
	The exceptions to this prohibition are limited under Texas law to
	specified types of gaming and to limited locations that meet
	specific criteria. Any gaming not expressly authorized is
	prohibited.
	Sec. 4.6.  The parties recognize that this agreement
	provides the Tribe substantial benefits that create a unique
	opportunity for the Tribe to operate video lottery terminals in an
	economic environment of limited competition from gaming on
	non-Indian lands in Texas, with the operation of video lottery
	games on non-Indian lands restricted to licensed racetracks in
	existence in 2007 or racetracks for which a license application was
	filed on or before January 1, 2007, in locations that provide the
	Tribe with a substantial exclusive territory for its video lottery
	terminal operations. The parties are mindful that this unique
	environment is of economic value to the Tribe. In consideration for
	the substantial rights enjoyed by the Tribe, and in further
	consideration for the State's willingness to enter into this gaming
	agreement and allow the Tribe the opportunity to operate video
	lottery terminals connected to the State's video lottery system,
	the Tribe has agreed to provide to the State, on a
	sovereign-to-sovereign basis, a portion of revenue generated by
	video lottery terminals on Indian lands and to collect and remit to
	the comptroller State sales and use taxes and State taxes on motor
	fuels, alcoholic beverages, cigarettes and tobacco products, and
	hotel occupancy generated at a video lottery terminal
	establishment.  The requirement to collect and remit these State
	taxes does not apply to an item sold to or used or consumed by a
	Tribe member.
	Sec. 4.7.  The Tribe desires to offer the play of video
	lottery terminals, as a means of generating revenue for the support
	of tribal governmental programs, such as health care, housing,
	sewer and water projects, police, corrections, fire, judicial
	services, highway and bridge construction, general assistance for
	tribal elders, day care for the children, economic development,
	educational opportunities, and other typical and valuable
	governmental services and programs for tribal members.
	Sec. 4.8.  The State recognizes that the positive effects of
	this gaming agreement may extend beyond the Tribe's lands to the
	Tribe's neighbors and surrounding communities and will generally
	benefit all of Texas. These positive effects and benefits may
	include not only those described in Section 4.7, but also may
	include increased tourism and related economic development
	activities that, through the Tribe's revenue sharing with the
	State, will generate additional funds for state governmental
	programs.
	Sec. 4.9.  The Tribe and the State jointly wish to protect
	their citizens from any criminal involvement in the gaming
	operations regulated under this gaming agreement.
	Sec. 4.10.  Nothing in this agreement shall supplant the
	role or duties of the Texas Department of Public Safety under state
	law. The Texas Racing Commission and the Texas Comptroller of
	Public Accounts do not have any role in regulation or oversight of
	gaming activities conducted by a Tribe.
	Sec. 4.11.  The terms of this gaming agreement strictly
	define and limit the relationship of the parties. Nothing in this
	gaming agreement shall be construed to create or imply a joint
	venture, partnership, principal/agent, or any other relationship
	between the parties.
	SECTION 5.0.  CLASS III GAMING AUTHORIZED AND PERMITTED.
	Sec. 5.1.  The Tribe is hereby authorized and permitted to
	engage only in the Class III gaming activities expressly referred
	to in Section 6.0 and may not engage in Class III gaming that is not
	expressly authorized in that section. Nothing in this agreement
	shall be construed to allow Internet gaming.
	SECTION 6.0.  AUTHORIZATION OF VIDEO LOTTERY TERMINALS.
	Sec. 6.1.  Authorized and Permitted Class III Gaming. The
	Tribe is hereby authorized and permitted to operate the following
	Class III gaming under the terms and conditions set forth in this
	agreement.
	Sec. 6.2.  The Tribe and State agree that the Tribe is
	authorized to operate video lottery terminals only in accordance
	with this gaming agreement. However, nothing in this agreement
	limits any right of the Kickapoo Traditional Tribe of Texas to
	operate any game that is a Class II game under IGRA, and Class II
	games are not subject to the exclusivity payments required under
	this gaming agreement.
	Sec. 6.2.1.  Operation of Video Lottery Terminals. Video
	lottery terminals must be operated in connection with the video
	lottery system and at all times be connected through communication
	technology or other video lottery equipment controlled by the State
	to a State controlled and operated video lottery central system.
	The Tribe may enter into a management gaming agreement for a third
	party video lottery manager, or the Tribe may act as its own video
	lottery manager.
	(a)  Third Party Video Lottery Manager. If the Tribe enters
	into a management gaming agreement for a third party video lottery
	manager, the manager must be licensed under Subchapter K, Chapter
	466, Texas Government Code, and all video lottery operations shall
	be subject to and in strict compliance with that subchapter. Any
	video lottery manager conducting business on Indian lands shall
	indemnify and hold harmless the State and the Texas regulatory
	commission and all officers and employees of both from any and all
	claims which may be asserted against a license holder, the
	commission, the State, and the members, officers, employees, and
	authorized agents of either, arising from the license holder's
	participation in the video lottery system authorized under the
	gaming agreement.
	(b)  Tribe as Video Lottery Manager. If the Tribe elects to
	manage video lottery terminal operations, then Sections 7.0 through
	14.0 of this agreement govern the procurement and operation of the
	video lottery terminals on the Indian lands of the Tribe.
	Sec. 6.3.  In order to remain eligible to operate video
	lottery terminals under this gaming agreement, the Tribe must
	strictly comply with all requirements of the gaming agreement,
	timely file all reports required by this gaming agreement, and
	timely remit all payments to the State required under this gaming
	agreement or applicable state law, including the taxes collected as
	provided by Section 4.6.
	Sec. 6.4.  Regardless of ownership of video lottery
	terminals, the State owns all video lottery games.
	SECTION 7.0.  PROCUREMENT OF VIDEO LOTTERY TERMINALS.
	Sec. 7.1.  All video lottery terminals shall be procured
	only from a video lottery terminal provider registered with the
	Texas regulatory commission under Subchapter K, Chapter 466, Texas
	Government Code. The Tribe may not enter into, or continue to make
	payments pursuant to, any contract or agreement for the provision
	of video lottery equipment with any person who is not registered by
	the commission as a video lottery terminal provider under
	Subchapter K, Chapter 466, Texas Government Code. Any agreement
	between the Tribe and a video lottery terminal provider shall be
	deemed to include a provision for the agreement's termination
	without further liability on the part of the Tribe, except for the
	bona fide repayment of all outstanding sums, exclusive of interest,
	owed as of, or payment for services or materials received up to, the
	date of termination, on revocation or nonrenewal of the video
	lottery terminal provider's registration.
	Sec. 7.2.  The Texas regulatory commission shall provide the
	Tribe a list of registered video lottery terminal providers,
	commission approved video lottery games, and commission approved
	video lottery terminals. The Tribe may not operate a video lottery
	terminal that has not been authorized by the commission.
	Sec. 7.3.  The Tribe shall file with the Texas regulatory
	commission any order placed for video lottery terminals
	simultaneously with the submission of the order to a
	commission-approved video lottery terminal provider.
	Sec. 7.4.  The Tribe or the video lottery manager shall
	provide all necessary capital investments and required
	improvements at a video lottery terminal establishment.
	SECTION 8.0.  LICENSING.
	Sec. 8.1.  Gaming Ordinance and Regulations. All video
	lottery operations conducted under this agreement, at a minimum,
	shall comply with all terms and conditions of this gaming
	agreement, a Gaming Ordinance adopted by the Tribe and approved in
	accordance with this agreement and any applicable federal law, and
	with all rules, regulations, procedures, specifications, and
	standards adopted by the TCA. All licensing related to the
	operation of video lottery terminals shall be conditioned on an
	agreement by the license holder to indemnify and hold harmless the
	State and the Texas regulatory commission and all officers and
	employees of both from any and all claims which may be asserted
	against a license holder, the commission, the State and the
	members, officers, employees, and authorized agents of either
	arising from the license or registration holder's participation in
	the video lottery system authorized under this agreement.
	Sec. 8.2.  Tribal Ownership and Regulation of Gaming
	Operation.  Except as otherwise provided by this agreement, the
	Tribe shall have the sole proprietary interest in the video lottery
	terminal establishment and video lottery terminals. This provision
	may not be construed to prevent the Tribe from granting security
	interests or other financial accommodations to secured parties,
	lenders or others, or to prevent the Tribe from entering into leases
	or financing agreements or a gaming management agreement with a
	video lottery manager.
	Sec. 8.3.  Government-to-Government Cooperation.  The
	parties intend that the licensing process provided for in this
	gaming agreement shall involve joint cooperation between the TCA
	and the Texas regulatory commission, as described in this
	agreement.
	Sec. 8.4.  Video Lottery Terminal Establishment. (a)  A
	video lottery terminal establishment authorized by this agreement
	shall be operated by a licensed video lottery manager or the Tribe
	and licensed by the TCA in conformity with the requirements of this
	gaming agreement, the Tribal Gaming Ordinance, and any applicable
	federal law.  The license shall be reviewed and renewed, if
	appropriate, every two years.  The Tribe shall promptly certify in
	writing to the Texas regulatory commission each time the license is
	renewed.  The certification must be posted in a conspicuous and
	public place in the video lottery terminal establishment at all
	times.
	(b)  In order to protect the health and safety of all video
	lottery terminal establishment patrons, guests, and employees, all
	video lottery terminal establishments of the Tribe constructed
	after the effective date of this gaming agreement, and all
	expansions or modifications to a site facility for a video lottery
	terminal establishment in existence as of the effective date of
	this gaming agreement, shall meet or exceed the building and safety
	codes of the Tribe. As a condition for engaging in that
	construction, expansion, modification, or renovation, the Tribe
	shall amend the Tribe's existing building and safety codes if
	necessary, or enact such codes if there are none, so that the codes
	meet the standards of the building and safety codes of any county in
	which the video lottery terminal establishment is located,
	including all uniform fire, plumbing, electrical, mechanical, and
	related codes in effect on the date this agreement takes effect.
	Nothing in this agreement shall be deemed to confer jurisdiction on
	any county or the State with respect to any reference to such
	building and safety codes.  Any construction, expansion, or
	modification must also comply with the federal Americans with
	Disabilities Act of 1990 (42 U.S.C. Sec. 12101 et seq.), as amended.
	(c)  The TCA shall issue a video lottery terminal
	establishment a certificate of occupancy prior to occupancy if it
	was not used for any lawful gaming prior to the effective date of
	this gaming agreement, or, if it was so used, within one year after
	the effective date.  The certificate shall be reviewed for
	continuing compliance once every two years.  Inspections by
	qualified building and safety experts shall be conducted under the
	direction of the TCA as the basis for issuing any certificate
	hereunder.  The TCA shall determine and certify that, as to new
	construction or new use for gaming activities, the video lottery
	terminal establishment meets the Tribe's building and safety code,
	or, as to facilities or portions of facilities that were used for
	the Tribe's gaming before this gaming agreement, that the video
	lottery terminal establishment or portions of the establishment do
	not endanger the health or safety of occupants or the integrity of
	the video lottery system.  The Tribe may not offer video lottery
	gaming in a video lottery terminal establishment that is
	constructed or maintained in a manner that endangers the health or
	safety of occupants or the integrity of the video lottery system.
	(d)  The State shall designate an agent or agents to be given
	reasonable notice of each inspection by the TCA's experts, and
	State agents may participate in any such inspection.  The Tribe
	agrees to correct any video lottery terminal establishment
	condition noted in an inspection that does not meet the standards
	set forth in Subsections (b) and (c).  The TCA and the State's
	designated agent or agents shall exchange any reports of an
	inspection within 10 days after completion of the report, and the
	reports shall be separately and simultaneously forwarded by both
	agencies to the Tribal chairperson.  On certification by the TCA's
	experts that a video lottery terminal establishment meets
	applicable standards, the TCA shall forward the experts'
	certification to the State within 10 days of issuance.  If the
	State's agent objects to that certification, the Tribe shall make a
	good faith effort to address the State's concerns, but if the State
	does not withdraw its objection, the matter will be resolved in
	accordance with the dispute resolution provisions of this gaming
	agreement.
	Sec. 8.5.  Suitability Standard Regarding Tribal Gaming
	Licenses. In reviewing an application for a tribal gaming license,
	and in addition to any standards set forth in the Tribal gaming
	ordinance, the TCA shall consider whether issuance of the license
	is inimical to public health, safety, or welfare, and whether
	issuance of the license will undermine public trust that the
	Tribe's operation of video lottery terminals, or tribal government
	gaming generally, is free from criminal and dishonest elements and
	would be conducted honestly.  A license may not be issued unless,
	based on all information and documents submitted, the TCA is
	satisfied that the applicant, in addition to any other criteria in
	any applicable federal law is all of the following:
	(a)  a person of good character, honesty, and integrity;
	(b)  a person whose prior activities, criminal record (if
	any), reputation, habits, and associations do not pose a threat to
	the security and integrity of the lottery or to the public interest
	of the State or to the effective operation and control of the
	lottery, or create or enhance the dangers of unsuitable, unfair, or
	illegal practices, methods, or activities in the conduct of the
	lottery, or in the carrying on of the business and financial
	arrangements incidental to the conduct of the lottery; and
	(c)  a person who in all other respects is qualified to be
	licensed as provided in this gaming agreement, any applicable
	federal law, the Tribal Gaming Ordinance, and any other criteria
	adopted by the TCA or the Tribe.  An applicant may not be found
	unsuitable solely on the ground that the applicant was an employee
	of a tribal gaming operation in Texas that was conducted before the
	effective date of this gaming agreement. Employment in an
	unauthorized gaming operation in Texas subsequent to the effective
	date of this agreement, however, shall impose a presumption of
	unsuitability.
	Sec. 8.6.  Gaming Employees.  (a)  Every gaming employee
	shall obtain, and thereafter maintain current, a valid tribal
	gaming license, which shall be subject to biennial renewal,
	provided that in accordance with Section 8.8.2, a person may be
	employed on a temporary or conditional basis pending completion of
	the licensing process.
	(b)  Without the concurrence of the Texas regulatory
	commission, the Tribe may not employ or continue to employ any
	person whose application to the commission for a registration,
	license, determination of suitability, or other regulatory
	approval, or for a renewal of a registration, license,
	determination of suitability, or other regulatory approval, has
	been denied or has expired without renewal.
	Sec. 8.7.  Financial Sources.  Any person providing
	financing, directly or indirectly, to the Tribe's video lottery
	terminal establishment or operation of video lottery terminals must
	be licensed by the TCA before receipt of that financing, provided
	that any person who is providing financing at the time of the
	execution of this gaming agreement must be licensed by the TCA
	within 90 days of such execution. The TCA shall review licenses at
	least every two years for continuing compliance. In connection
	with the review, the TCA shall require the Financial Source to
	update all information provided in the previous application. Any
	agreement between the Tribe and a Financial Source is deemed to
	include a provision for its termination without further liability
	on the part of the Tribe, except for the bona fide repayment of all
	outstanding sums, exclusive of interest, owed as of the date of
	termination, on revocation or nonrenewal of the Financial Source's
	license by the TCA based on a determination of unsuitability by the
	Texas regulatory commission.  The Tribe may not enter into, or
	continue to make payments pursuant to any contract or agreement for
	the provision of financing with any person whose application to the
	commission for a determination of suitability has been denied or
	has expired without renewal. A video lottery terminal provider who
	provides financing exclusively in connection with the sale or lease
	of video lottery equipment obtained from that video lottery
	terminal provider may be registered solely in accordance with the
	commission's registration procedures for video lottery terminal
	providers.  The TCA may, in its discretion, exclude from the
	licensing requirements of this section, financing provided by:
	(1)  a federally regulated or state regulated bank,
	savings and loan, or other federally regulated or state regulated
	lending institution;
	(2)  any agency of the federal, state, or local
	government; or
	(3)  any investor who, alone or in conjunction with
	others, holds less than 10 percent of any outstanding indebtedness
	evidenced by bonds issued by the Tribe.
	Sec. 8.8.  Processing License Applications. Each applicant
	for a tribal gaming license shall submit the completed application
	on forms prescribed by the TCA and approved by the Texas regulatory
	commission, along with the required information and an application
	fee, to the TCA in accordance with the rules and regulations of that
	agency.  The parties agree that for purposes of this agreement, the
	standards set forth under federal law with regard to information
	required for Tribal gaming operation applications shall govern.
	Accordingly, at a minimum, the TCA shall require submission and
	consideration of all information required under federal law,
	including 25 C.F.R. Section 556.4, for licensing primary management
	officials and key employees.  For applicants who are business
	entities, the licensing provisions apply to the entity and:
	(a)  each officer and director;
	(b)  each principal management employee, including any chief
	executive officer, chief financial officer, chief operating
	officer, and general manager;
	(c)  each owner or partner, if an unincorporated business;
	(d)  each shareholder who owns more than 10 percent of the
	shares of the corporation, if a corporation; and
	(e)  each person or entity, other than a financial
	institution the TCA has determined does not require a license under
	the preceding section, that, alone or in combination with others,
	has provided financing in connection with any video lottery
	equipment or video lottery terminal establishment under this gaming
	agreement, if that person or entity provided more than five percent
	of:
	(1)  the start-up capital;
	(2)  the operating capital over a 12-month period; or
	(3)  a combination thereof.
	For purposes of this section, if any commonality of the
	characteristics identified in Subsections (a)-(e) exist between
	any two or more entities, the entities may be deemed to be a single
	entity.  Nothing herein precludes the Tribe or TCA from requiring
	more stringent licensing requirements.
	Sec. 8.8.1.  Background Investigations of Applicants.  (a)
	The TCA shall conduct or cause to be conducted all necessary
	background investigations reasonably required to determine that
	the applicant is qualified for a tribal gaming license under the
	standards set forth in this gaming agreement, and to fulfill all
	requirements for licensing under any applicable federal law, the
	Tribal Gaming Ordinance, and this gaming agreement.  The TCA may not
	issue any license other than a temporary license until a
	determination is made that the qualifications have been met.
	(b)  Instead of completing its own background investigation,
	and to the extent that doing so does not conflict with or violate
	any applicable federal law or the Tribal Gaming Ordinance, the TCA
	may contract with the Texas regulatory commission or an independent
	contractor approved by the commission for the conduct of background
	investigations.  An applicant for a tribal gaming license must
	provide releases to the commission to make available to the TCA
	background information regarding the applicant.  The commission
	shall cooperate in furnishing to the TCA that information, unless
	doing so would violate any agreement the commission has with a
	source of the information other than the applicant, or would impair
	or impede a criminal investigation, or unless the TCA cannot
	provide sufficient safeguards to assure the commission that the
	information will remain confidential.
	Sec. 8.8.2.  Temporary Licensing of Employees.
	Notwithstanding any contrary provision in this gaming agreement,
	the TCA may issue a temporary license and may impose specific
	conditions on the license pending completion of the applicant's
	background investigation as the TCA in its sole discretion shall
	determine, if:
	(a)  the applicant for a tribal gaming license has completed
	a license application in a manner satisfactory to the TCA; and
	(b)  the TCA has conducted a preliminary background
	investigation, and the investigation or other information held by
	the TCA does not indicate:
	(1)  that the applicant has a criminal history that
	could pose a threat to the security and integrity of the lottery or
	to the public interest of the State or the effective operation and
	control of the lottery, or create or enhance the dangers of
	unsuitable, unfair, or illegal practices, methods, or activities in
	the conduct of the lottery, or in the carrying on of the business
	and financial arrangements incidental thereto;
	(2)  other information in the applicant's background
	that would either disqualify the applicant from obtaining a license
	or cause a reasonable person to investigate further before issuing
	a license; or
	(3)  that the applicant is otherwise unsuitable for
	licensing.
	(c)  The TCA may require special fees to issue or maintain a
	temporary license.
	(d)  A temporary license shall remain in effect until
	suspended or revoked, or until a final determination is made on the
	application.  At any time after issuance of a temporary license, the
	TCA may suspend or revoke the temporary license in accordance with
	Sections 8.9.1 or 8.9.5, and the Texas regulatory commission may
	request suspension or revocation in accordance with Section 8.9.
	(e)  For purposes of this agreement, the parties agree that
	the standards set forth in 25 C.F.R. Part 558 govern licensing and
	investigations required under the provisions of this agreement.
	Nothing in this agreement shall be construed to relieve the Tribe of
	any obligation under this agreement to comply with the standards
	set forth in 25 C.F.R. Part 558.
	Sec. 8.9.  Tribal Gaming License Issuance.  (a)  On
	completion of the necessary background investigation, the TCA may
	issue a tribal gaming license on a conditional or unconditional
	basis.  Nothing herein shall create a property or other right of an
	applicant in an opportunity to be licensed, or in a license itself,
	both of which shall be considered to be privileges granted to the
	applicant in the sole discretion of the TCA subject to oversight by
	the Texas regulatory commission as provided herein. Any license,
	registration, suitability, qualification issued, or other
	regulatory approval granted pursuant to or in compliance with this
	gaming agreement is a revocable privilege, and a holder does not
	acquire any vested right therein or thereunder.
	(b)  State and Tribal courts shall have no jurisdiction to
	review decisions to deny, limit, or condition a license,
	registration, suitability, qualification, or request for approval
	unless the judicial review is sought on the ground that such a
	denial, limitation, or condition is proven by clear and convincing
	evidence to be based on a suspect classification such as race,
	color, religion, gender, or national origin, protected under the
	Equal Protection Clause of the United States Constitution.
	Sec. 8.9.1.  Denial, Suspension, or Revocation of Licenses.
	(a)  The TCA may deny any application for a tribal gaming license
	and may revoke any license issued if the TCA determines the
	application is incomplete or deficient or if the applicant is
	determined to be unsuitable or otherwise unqualified for the gaming
	license.  Pending consideration of revocation, the TCA may
	summarily suspend a license in accordance with Section 8.9.5.  All
	rights to notice and hearing shall be governed by tribal law.  The
	TCA shall notify the applicant in writing of the tribal law
	provisions and of the intent to suspend or revoke the license.
	(b)  On receipt of notice that the Texas regulatory
	commission has determined a person would be unsuitable for
	licensure in a video lottery terminal establishment or related to
	video lottery terminal operations subject to the jurisdiction of
	the commission, the TCA shall promptly revoke any license issued to
	the person.
	Sec. 8.9.2.  Renewal of Licenses; Extensions; Further
	Investigation. The term of a tribal gaming license may not exceed
	five years, and application for renewal of a license must be made
	before the license's expiration.  An applicant for renewal of a
	license must provide updated material as requested, on the
	appropriate renewal forms, but, at the discretion of the TCA, may
	not be required to resubmit historical data previously submitted or
	that is otherwise available to the TCA.  At the discretion of the
	TCA, an additional background investigation may be required at any
	time if the TCA determines the need for further information
	concerning the applicant's continuing suitability or eligibility
	for a license.  Before renewing a license, the TCA shall deliver to
	the Texas regulatory commission copies of all information and
	documents received in connection with the application for renewal.
	Sec. 8.9.3.  Identification Cards. The TCA shall require
	all persons who are required to be licensed to wear, in plain view
	at all times while in the video lottery terminal establishment,
	identification badges issued by the TCA.  Identification badges
	must include a photograph and an identification number that is
	adequate to enable TCA agents to readily identify the person and
	determine the validity and date of expiration of the license.
	Sec. 8.9.4.  Fees for Tribal Gaming License.  The fees for
	all tribal gaming licenses shall be set by the TCA.
	Sec. 8.9.5.  Summary Suspension of Tribal Gaming License.
	The TCA may summarily suspend a tribal gaming license if the TCA
	determines that the continued licensing of the person or entity
	could constitute a threat to the public health or safety or may
	violate the TCA's licensing or other standards or any provision of
	applicable federal or state law or of this agreement.  Any right to
	notice or hearing in regard to the suspension are governed by tribal
	law provided the law is not inconsistent with any provision of this
	agreement.
	Sec. 8.9.6.  State Certification Process.  (a)  On receipt of
	a completed tribal gaming license application and a determination
	by the TCA that it intends to issue the earlier of a temporary or
	permanent license, the TCA shall transmit to the Texas regulatory
	commission a notice of intent to license the applicant, together
	with all of the following:
	(1)  a copy of all tribal license application materials
	and information received by the TCA from the applicant;
	(2)  an original set of fingerprint cards;
	(3)  a current photograph; and
	(4)  except to the extent waived by the commission, the
	releases of information, waivers, and other completed and executed
	forms obtained by the TCA.
	(b)  Except for an applicant for licensing as a non-key
	gaming employee, the TCA shall require the applicant to file an
	application with the Texas regulatory commission, before issuance
	of a temporary or permanent tribal gaming license, for a
	determination of suitability for licensure under Subchapter K,
	Chapter 466, Texas Government Code. Investigation and disposition
	of that application is governed entirely by State law, and the
	commission shall determine whether the applicant would be found
	suitable for licensure in a video lottery terminal establishment or