80R10688 YDB-F
	By: Flores	H.B. No. 3351

	A BILL TO BE ENTITLED
	AN ACT
	relating to the operation of video lottery games for this state to
	provide additional money to fund governmental programs; the
	creation, powers, and duties of the Texas Gaming and Boxing
	Commission; the powers and duties of the Texas Lottery Commission,
	the Texas Racing Commission, and the Texas Commission of Licensing
	and Regulation, and the regulation of casino gaming and other
	gambling activities in this state; making an appropriation;
	providing penalties.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	ARTICLE 1.  AUTHORIZATION OF VIDEO LOTTERY
	SECTION 1.01.  Section 466.002, Government Code, is amended
	by amending Subdivisions (2) and (4)-(10) and adding Subdivisions
	(2-a), (5-a), and (11)-(35) 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.
	(2-a)  "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.
	(5-a)  "Division" means the lottery division
	established by the commission under Chapter 467.
	(6)  "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, compact
	disc-read only memory, flash random access memory, or other
	technology medium the commission approves for use in a video
	lottery terminal.
	(7) [(4)]  "Executive director" means the executive
	director of the commission.
	(8)  "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.
	(9)  "House-banked game" means a game of chance:
	(A)  in which the house plays as a participant;
	(B)  in which the house competes against all
	players, collects from all losers, and pays all winners; and
	(C)  that the house has an opportunity to win.
	(10)  "Indian lands" means land over which an Indian
	tribe exercises governmental power and:
	(A)  that was held in trust by the United States on
	January 1, 1998, for the benefit of the Indian tribe or an
	individual member of the Indian tribe pursuant to the Restoration
	Acts (25 U.S.C. Section 731 and 25 U.S.C. Section 1300 et seq.); or
	(B)  on which Class III gaming is permitted under
	the Indian Gaming Regulatory Act (18 U.S.C. Section 1166 et seq. and
	25 U.S.C. Section 2701 et seq.).
	(11)  "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.
	(12) [(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
	and determined 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].
	(13) [(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].
	(14) [(7)]  "Lottery operator" means a person selected
	under Section 466.014(b) to operate a lottery game.
	(15)  "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.
	(16)  "Net terminal income" means the total amount of
	money paid to play video lottery games less the value of all credits
	redeemed for money, including any progressive prizes and bonuses,
	by the players of the video lottery games.  The costs associated
	with progressive prizes may not be deducted from the total amount of
	money paid to play the video lottery games for purposes of
	determining net terminal income.  Promotional prizes 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.
	(17)  "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).
	(18)  "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.
	(19) [(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.
	(20)  "Racetrack" means a racetrack as defined by
	Section 1.03(25), Texas Racing Act (Article 179e, Vernon's Texas
	Civil Statutes), that is:
	(A)  a class 1, class 2, or class 3 horse racetrack
	for which a pari-mutuel license was in effect on June 1, 2007, or
	for which a person by that date had applied for a pari-mutuel
	license to conduct horse racing as a class 1 or class 2 racetrack;
	or
	(B)  a greyhound racetrack for which a pari-mutuel
	license was in effect on June 1, 2007, or for which a person by that
	date had applied and qualified for a pari-mutuel license to conduct
	greyhound racing.
	(21) [(9)]  "Sales agent" or "sales agency" means a
	person licensed under this chapter to sell tickets.
	(22)  "Slot machine" means a mechanical, electrical, or
	other type of device, contrivance, or machine 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.
	(23)  "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.
	(24) [(10)]  "Ticket" means any tangible evidence
	issued to provide participation in a lottery game authorized by
	this chapter other than a video lottery game.
	(25)  "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, determines the outcome of all
	video lottery games, and allows the commission to continuously
	monitor the activity of each video lottery terminal and to disable
	any video lottery terminal in this state.
	(26)  "Video lottery central system provider" means a
	person that, under a contract with the commission, provides the
	video lottery central system.
	(27)  "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)  connect video lottery terminals
	together for accounting or wide-area prize or promotional purposes;
	(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.
	(28)  "Video lottery game" means an 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 roulette, dice, or baccarat game themes associated with
	casino gambling, except that game themes displaying symbols that
	roll on drums to simulate a classic casino slot machine or themes of
	other card games and keno may be used.
	(29)  "Video lottery manager" means a person who:
	(A)  is licensed by the commission under this
	chapter to manage a video lottery terminal establishment; or
	(B)  provides management services for a video
	lottery terminal establishment on Indian lands for an Indian tribe
	that has entered into an agreement with the governor for the
	operation of video lottery games.
	(30)  "Video lottery retailer" means a person licensed
	to operate a video lottery terminal establishment at which video
	lottery games are conducted under Subchapter K.
	(31)  "Video lottery system" means the system
	authorized under Subchapter K and controlled and operated by the
	commission under which individuals play lottery games on video
	lottery terminals as authorized under that subchapter.
	(32)  "Video lottery terminal" means  an interactive
	electronic device that is capable of displaying video lottery
	games.
	(33)  "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.
	(34)  "Video lottery terminal provider" means a person
	in the business of manufacturing or distributing video lottery
	terminals in this state.
	(35)  "Video lottery ticket" means the tangible
	evidence issued by a video lottery terminal to reflect winnings
	from the play of a video lottery game.
	SECTION 1.02.  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 control and supervise
	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 operate, control,
	and supervise video lottery games as necessary to comply with a
	gaming agreement under this chapter.
	SECTION 1.03.  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 at or admission to a
	video lottery terminal establishment or a racetrack at which a
	video lottery terminal establishment is located unless
	specifically authorized by statute.
	SECTION 1.04.  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.
	(d)  In the acquisition or provision of facilities,
	supplies, equipment, materials, or services related to the
	implementation of video lottery, the commission must comply with
	procurement procedures prescribed under:
	(1)  Subtitle D, Title 10; and
	(2)  Section 466.101.
	SECTION 1.05.  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 21 [18] 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 1.06.  Section 466.017, Government Code, is amended
	to read as follows:
	Sec. 466.017.  AUDITS.  (a)  The commission [executive
	director] shall contract with the state auditor for the state
	auditor [provide for a certified public accountant] to conduct an
	independent audit of the commission's annual financial statements
	in accordance with the standards applicable to financial audits
	under the Government Auditing Standards (2003 Revision) issued by
	the Comptroller General of the United States [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. The certified public
	accountant shall present an audit report to the executive director,
	the commission, the governor, the comptroller, and the legislature
	not later than the 30th day after the submission date for the annual
	financial report required by the General Appropriations Act.   The
	report must contain recommendations to enhance the earnings
	capability of the lottery and improve the efficiency of lottery
	operations. The state auditor may review the results of and working
	papers related to the audit.]
	(b)  The records of a [Each] lottery operator, sales agent,
	video lottery manager, video lottery retailer, video lottery
	terminal provider, or video lottery central system provider
	[operator's and sales agent's records] are subject to audit by the
	commission and the state auditor. For the purpose of carrying out
	this chapter, the executive director or state auditor may examine
	all books, records, papers, or other objects that the executive
	director or state auditor determines are necessary for conducting a
	complete examination under this chapter and may also examine under
	oath any officer, director, or employee of a lottery operator, [or]
	sales agent, video lottery manager, video lottery retailer, video
	lottery terminal provider, or video lottery central system
	provider. The executive director or state auditor may conduct an
	examination at the principal office or any other office of the
	person subject to the audit [lottery operator or sales agent] or may
	require the person [lottery operator or sales agent] to produce the
	records at the office of the commission or state auditor. If a
	sales agent, video lottery manager, video lottery retailer, video
	lottery terminal provider, or video lottery central system provider
	refuses to permit an examination or to answer any question
	authorized by this subsection, the executive director may summarily
	suspend the license or certificate of registration of the sales
	agent, video lottery manager, video lottery retailer, or video
	lottery terminal provider under Section 466.160 or Subchapter K
	until the examination is completed as required. A video lottery
	manager, video lottery retailer, video lottery terminal provider,
	or video lottery central system provider that is audited as
	provided by this section is responsible for the costs incurred by
	the commission or auditor in conducting the audit.  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 1.07.  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 1.08.  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, video lottery
	terminal establishments, and video lottery central system
	providers; and
	(14)  other security aspects of lottery operations,
	including video lottery game operations.
	SECTION 1.09.  Section 466.021(a), Government Code, is
	amended to read as follows:
	(a)  The executive director shall, every two years, employ an
	independent firm experienced in demographic analysis to conduct a
	demographic study of lottery players. The study must examine
	[include] the income, age, sex, race, education, and frequency of
	participation of players. The study must distinguish between
	players of traditional lottery games and video lottery games.
	SECTION 1.10.  Section 466.022, Government Code, is amended
	by amending Subsection (b) and adding Subsections (c), (d), and (e)
	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;
	(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; and
	(5)  information that pertains to an applicant's
	criminal record, antecedents, and background and is furnished to or
	obtained by the commission from any source, including information
	obtained by the commission under Section 411.108(d).
	(c)  Information that qualifies as confidential under
	Subsection (b)(4) or (5) may be disclosed wholly or partly only as
	necessary to administer this chapter or under a court order. The
	commission, subject to appropriate procedures, may disclose the
	information and data to an authorized agent of a political
	subdivision of this state, the United States, another state or a
	political subdivision of another state, a tribal law enforcement
	agency, or the government of a foreign country.
	(d)  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 certificate holder, or video lottery terminal
	establishment.
	(e)  Notwithstanding any other provision of state law, the
	information provided under Subsection (c) or (d) may not otherwise
	be disclosed without specific commission authorization.
	SECTION 1.11.  Section 466.024, Government Code, is amended
	to read as follows:
	Sec. 466.024.  PROHIBITED GAMES.  (a)  Except as provided by
	Chapter 2004, Occupations Code, the [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 sports
	event.
	(b)  Except as provided by Chapter 2001 or 2005, Occupations
	Code, the [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 controlled and supervised by the
	commission 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 1.12.  Section 466.025, Government Code, is amended
	to read as follows:
	Sec. 466.025.  REPORTS OF TICKETS SOLD, NET TERMINAL INCOME,
	AND PRIZES AWARDED.  For each lottery game, other than a video
	lottery game, after the last date on which a prize may be claimed
	under Section 466.408(d), the director shall prepare a report that
	shows the total number of tickets sold and the number and amounts of
	prizes awarded in the game. The report must be available for public
	inspection.  For video lottery games, the director shall prepare a
	weekly report that shows net terminal income for the preceding
	week.
	SECTION 1.13.  Section 466.103(a), Government Code, is
	amended to read as follows:
	(a)  Except as provided by Subsection (b), the executive
	director may not award a contract for the purchase or lease of
	facilities, goods, or services related to lottery operations to a
	person who:
	(1)  would be denied a license as a sales agent under
	Section 466.155; or
	(2)  with regard to a contract for the purchase or lease
	of video lottery equipment:
	(A)  is not a registered video lottery terminal
	provider if a certificate of registration is required; or
	(B)  would be deemed unsuitable to be a video
	lottery terminal provider under Subchapter K.
	SECTION 1.14.  Section 466.110, Government Code, is amended
	to read as follows:
	Sec. 466.110.  PROHIBITED ADVERTISEMENTS.  The legislature
	intends that advertisements or promotions sponsored by the
	commission or the division for the lottery not be of a nature that
	unduly influences any person to purchase a lottery ticket or number
	or play a video lottery game.
	SECTION 1.15.  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 1.16.  Section 466.158(a), Government Code, is
	amended to read as follows:
	(a)  Unless suspended or revoked, a license issued under this
	subchapter expires on the date specified in the license, which may
	not be later than the second anniversary of its date of issuance.
	SECTION 1.17.  Section 466.201(a), Government Code, is
	amended to read as follows:
	(a)  The commission is entitled to conduct an investigation
	of and is entitled to obtain criminal history record information
	maintained by the Department of Public Safety, the Federal Bureau
	of Investigation Identification Division, or another law
	enforcement agency to assist in the investigation of:
	(1)  a sales agent or an applicant for a sales agent
	license;
	(2)  a person required to be named in a license
	application;
	(3)  a lottery operator, video lottery manager, video
	lottery retailer, video lottery terminal provider, or video lottery
	central system provider, or prospective lottery operator, video
	lottery manager, video lottery retailer, video lottery terminal
	provider, or video lottery central system provider;
	(4)  an employee of a lottery operator, video lottery
	manager, video lottery retailer, video lottery terminal provider,
	or video lottery central system provider or prospective lottery
	operator, video lottery manager, video lottery retailer, video
	lottery terminal provider, or video lottery central system
	provider, if the employee is or will be directly involved in lottery
	operations;
	(5)  a person who manufactures or distributes lottery
	equipment or supplies, or a representative of a person who
	manufactures or distributes lottery equipment or supplies offered
	to the lottery;
	(6)  a person who has submitted a written bid or
	proposal to the commission in connection with the procurement of
	goods or services by the commission, if the amount of the bid or
	proposal exceeds $500;
	(7)  an employee or other person who works for or will
	work for a sales agent or an applicant for a sales agent license;
	(8)  a person who proposes to enter into or who has a
	contract with the commission to supply goods or services to the
	commission; or
	(9)  if a person described in Subdivisions (1) through
	(8) is not an individual, an individual who:
	(A)  is an officer or director of the person;
	(B)  holds more than 10 percent of the stock in the
	person;
	(C)  holds an equitable interest greater than 10
	percent in the person;
	(D)  is a creditor of the person who holds more
	than 10 percent of the person's outstanding debt;
	(E)  is the owner or lessee of a business that the
	person conducts or through which the person will conduct
	lottery-related activities;
	(F)  shares or will share in the profits, other
	than stock dividends, of the person;
	(G)  participates in managing the affairs of the
	person; or
	(H)  is an employee of the person who is or will be
	involved in:
	(i)  selling tickets; or
	(ii)  handling money from the sale of
	tickets.
	SECTION 1.18.  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.  (a)  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).
	(b)  The Department of Public Safety or a state or local law
	enforcement agency in this state, in accordance with an interagency
	agreement with the commission, shall provide any assistance
	requested by the commission in the administration and enforcement
	of this chapter, including conducting background investigations of
	a person seeking a license, certificate of registration, or other
	commission authorization required under Subchapter K or of any
	person required to be named in an application for a license,
	certificate of registration, or other commission authorization
	under that subchapter.
	(c)  This section does not limit the commission's right to
	obtain criminal history record information from any other local,
	state, or federal agency. The commission may enter into a
	confidentiality agreement with the agency as necessary and proper.
	(d)  Except as otherwise provided by Section 411.108(d) or
	another provision of this chapter, criminal history record
	information obtained by the commission under this section may be
	disclosed only:
	(1)  to another law enforcement agency to assist in or
	further an investigation related to the commission's operation and
	oversight of video lottery; or
	(2)  under a court order.
	SECTION 1.19.  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 1.20.  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 1.21.  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 terminal
	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 a video lottery terminal as
	authorized by the commission for a period not to exceed 120
	consecutive days, and the commission may possess video lottery
	terminals for study and evaluation.
	(d)  Nothing in this section shall be construed to prohibit
	the operation, use, or possession of equipment, machines,
	technological aids, or other devices allowed in connection with the
	play of bingo under Chapter 2001, Occupations Code.
	SECTION 1.22.  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 1.23.  The heading to Section 466.3051, Government
	Code, is amended to read as follows:
	Sec. 466.3051.  SALE OF TICKET OR LOTTERY GAME TO OR PURCHASE
	OF TICKET OR LOTTERY GAME BY PERSON YOUNGER THAN 21 [18] YEARS OF
	AGE.
	SECTION 1.24.  Section 466.3051, Government Code, is amended
	by amending Subsections (a), (b), (c), (d), and (e) and adding
	Subsection (a-1) to read as follows:
	(a)  A sales agent or an employee of a sales agent commits an
	offense if the person intentionally or knowingly sells or offers to
	sell a ticket to an individual that the person knows is younger than
	21 [18] years of age.
	(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 21 [18] years of age
	commits an offense if the individual:
	(1)  purchases a ticket;
	(2)  plays a video lottery game; or
	(3) [(2)]  falsely represents the individual to be 21
	[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 ticket or play a video lottery game.
	(c)  A person 21 [18] years of age or older may purchase a
	ticket to give as a gift to another person, including an individual
	younger than 21 [18] years of age.
	(d)  It is a defense to the application of Subsection (b)
	that the individual younger than 21 [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.
	(e)  An offense under Subsection (a) or (a-1) is a Class C
	misdemeanor.
	SECTION 1.25.  Section 466.3053, Government Code, is amended
	to read as follows:
	Sec. 466.3053.  PURCHASE OF TICKET OR VIDEO LOTTERY GAME
	WITH PROCEEDS OF AFDC CHECK OR FOOD STAMPS.  (a)  A person commits an
	offense if the person intentionally or knowingly purchases a ticket
	or plays a video lottery game with:
	(1)  the proceeds of a check issued as a payment under
	the Aid to Families with Dependent Children program administered
	under Chapter 31, Human Resources Code; or
	(2)  a food stamp coupon issued under the food stamp
	program administered under Chapter 33, Human Resources Code.
	(b)  An offense under this section is a Class C misdemeanor.
	SECTION 1.26.  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 1.27.  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 1.28.  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 1.29.  Section 466.317, Government Code, is amended
	by adding Subsection (a-1) and amending Subsections (b) and (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.
	(b)  The state may enter into a compact with another state or
	state government [or an Indian tribe or tribal government] to
	permit the sale of lottery tickets of this state in the state's[,
	tribe's,] or government's jurisdiction and to allow the sale of the
	state's[, tribe's,] or government's lottery tickets in this state.
	(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 1.30.  Section 466.355, Government Code, is amended
	by amending Subsection (a) and adding Subsection (d) 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 [chapter], 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.
	(d)  Immediately after the comptroller makes the August
	transfer to the foundation school fund under Subsection (b)(4) and
	the transfer to the foundation school fund for the following
	September 15 under Subsection (c), the comptroller shall determine
	whether the total amount transferred to the foundation school fund
	from the state lottery fund in the current fiscal year is less than
	the total amount transferred to the foundation school fund from the
	state lottery account in the fiscal year ending August 31, 2007. If
	the comptroller determines that the total amount transferred to the
	foundation school fund in the current fiscal year is less than the
	total amount transferred in the fiscal year ending August 31, 2007,
	the comptroller not later than August 31 shall transfer to the
	foundation school fund from the state video lottery account in the
	general revenue fund an amount equal to the difference.
	SECTION 1.31.  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 1.32.  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 1.33.  Section 466.409, Government Code, is amended
	to read as follows:
	Sec. 466.409.  TREATMENT OF PRIZE PAYABLE ON TICKET PURCHASE
	BY INELIGIBLE PERSON.  If an individual listed in Section 466.254
	purchases a ticket or claims or otherwise attempts to collect or
	receive a lottery prize or a share of a lottery prize or an
	individual younger than 21 [18] years of age directly purchases a
	ticket, the individual is not eligible to receive a prize or share
	of a prize, and the prize or share of a prize otherwise payable on
	the ticket is treated as an unclaimed prize as provided by Section
	466.408.
	SECTION 1.34.  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)  This state's public policy prohibiting gambling is
	subject only to limited exceptions provided by the Texas Racing Act
	(Article 179e, Vernon's Texas Civil Statutes) or enumerated in the
	Texas Constitution and approved by the voters.
	(2)  Any game that is a lottery cannot lawfully be
	operated in this state unless the game is excepted from the
	constitutional prohibition against lotteries. In 1991, the
	electorate approved a constitutional amendment authorizing the
	state to operate lotteries.  In 2007, the electorate approved a
	constitutional amendment allowing expansion of the existing state
	lottery through a state-controlled video lottery system allowing
	video lottery terminals connected to a state-controlled and
	determined video lottery central system to be placed at locations
	determined in accordance with law enacted by the legislature.
	(3)  The purpose and intent of this chapter is to carry
	out the intent of the voters as established by the approval of
	Section 47-a, Article III, Texas Constitution.
	(4)  The people of this state intend to allow only
	state-controlled video lottery games to be conducted in this state
	and only in locations licensed by this state to operate video
	lottery terminals or at locations on Indian lands under an
	agreement between this state and the appropriate Indian tribe.
	(5)  This state has the authority and responsibility to
	control the proliferation of gambling by:
	(A)  limiting the total number of video lottery
	terminals permitted at authorized locations in this state;
	(B)  limiting video lottery to licensed
	establishments;
	(C)  extending strict and exclusive state
	oversight and supervision to all persons, locations, practices, and
	associations related to the operation of video lottery games; and
	(D)  providing comprehensive law enforcement
	supervision of video lottery game activities.
	(6)  This state's ability to monitor and control the
	operation of all video lottery terminals ensures the integrity of
	the system and provides for the most efficient oversight and
	supervision. Costs incurred for oversight and supervision of
	gambling will be significantly less than if video lottery terminals
	were not operated as part of the video lottery system. In addition,
	providing for the state-controlled and determined system will
	defend against criminal infiltration of gambling operations.
	(7)  The video lottery games operated at video lottery
	terminal establishments under this chapter are controlled and
	determined 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.
	(8)  Through the video lottery system this state will
	monitor the network of video lottery terminals to ensure maximum
	security unique to state-operated 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.
	(9)  By limiting the operation of video lottery
	terminals to those connected to the state-controlled and determined
	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. Limiting video lottery terminals to those
	controlled by this state and located at licensed establishments is
	reasonably designed to defend against the criminal infiltration of
	gambling operations and adverse impacts on communities statewide.
	By restricting video lottery terminals to limited locations and
	video lottery terminals controlled by this state that may be
	disabled by this state if necessary to protect the public, this
	chapter furthers the state's purpose of ensuring that such gambling
	activities are free from criminal and undesirable elements.
	(10)  This chapter is game-specific and may not be
	construed to allow the operation of any other form of gambling
	unless specifically allowed by this chapter. This chapter 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 sports contest that
	are prohibited under other state law.
	(11)  To effectuate the will of the voters, any video
	lottery games on lands of Indian tribes must be in strict compliance
	with state law, unless otherwise required by federal law, or in
	accordance with a gaming agreement negotiated with the governor and
	ratified by the legislature.
	(12)  This state has conferred a substantial economic
	benefit on federally recognized Indian tribes by allowing operation
	of video lottery terminals on lands held in trust by the Indian
	tribes and on Indian lands on which gaming is allowed under
	applicable federal law. Federally recognized Indian tribes have
	the exclusive right to operate video lottery terminals at locations
	on the Indian lands in this state without incurring the investment
	necessary to construct, maintain, and operate racetracks for live
	racing, and through revenue-sharing both the policy of
	self-governance for the tribes and this state's interests in
	generating additional revenue to fund governmental programs can be
	promoted.
	(13)  The public has an interest in video lottery game
	operations, and other gaming operations conducted under Section
	47-a, Article III, Texas Constitution, and this chapter represent
	an exception to the general policy of this state prohibiting
	wagering for private gain. Therefore, participation in a video
	lottery game by a holder of a license, certificate of registration,
	or approval under this chapter is considered a privilege
	conditioned on the proper and continued qualification of the holder
	and on the discharge of the affirmative responsibility of each
	holder to provide to the commission or other regulatory and
	investigatory authorities established by this chapter any
	assistance and information necessary to assure that the policies
	declared by this chapter are achieved. Consistent with this
	policy, the legislature intends this chapter to:
	(A)  preclude the creation of any property right
	in any license, certificate of registration, or approval issued or
	granted by this state under this chapter, the accrual of any value
	to the privilege of participation in any video lottery game
	operation, or the transfer of a license or certificate; and
	(B)  require that participation in video lottery
	game operations be solely conditioned on the individual
	qualifications of persons seeking this privilege.
	(14)  Only video lottery terminals lawfully operated in
	connection with a video lottery system authorized by this
	subchapter may be lawfully operated on Indian lands under the
	Johnson Act (15 U.S.C. Section 1175).
	Sec. 466.502.  CONSTRUCTION; APPLICABILITY OF OTHER LAWS.
	(a)  Nothing contained in this chapter may be construed to
	implicitly repeal or modify existing state laws with respect to
	gambling, except that the state lottery and video lottery terminals
	are not prohibited by another law if conducted as authorized under
	this subchapter.
	(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, including hearings
	before the State Office of Administrative Hearings.
	(c)  Video lottery equipment operated under commission
	authority and this chapter is exempt from 15 U.S.C. Section 1172.
	Sec. 466.503.  AUTHORITY TO OPERATE VIDEO LOTTERY SYSTEM.
	(a)  The commission may implement and operate a video lottery system
	and control the operation of video lottery terminals at video
	lottery terminal establishments in accordance with this chapter
	and, for a video lottery terminal establishment at a racetrack, the
	Texas Racing Act (Article 179e, Vernon's Texas Civil Statutes).
	This chapter supersedes any conflicting or inconsistent provision
	of the Texas Racing Act.
	(b)  The commission may allow the operation of video lottery
	terminals pursuant to this chapter at locations on Indian lands in
	accordance with an effective gaming agreement and in compliance
	with applicable federal law.
	Sec. 466.504.  VIDEO LOTTERY GAMES; STATE OWNERSHIP AND
	PROPRIETARY INTEREST.  (a)  This state must own all video lottery
	games conducted through the video lottery system, regardless of
	ownership of the video lottery terminal on which the game is played.
	This state must possess a proprietary interest in:
	(1)  the main logic boards and any electronic storage
	medium used in video lottery equipment or games; and
	(2)  software consisting of computer programs,
	documentation, and other related materials necessary for the
	operation of the video lottery system.
	(b)  For purposes of this chapter, 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. 466.505.  STATE CONTROL OF VIDEO LOTTERY SYSTEM.  (a)
	The commission shall control and operate the video lottery system
	and the video lottery central system.
	(b)  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.
	Sec. 466.506.  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 through which the commission has the exclusive
	and unilateral ability to:
	(1)  control and determine the outcome of all video
	lottery games;
	(2)  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
	(3)  provide the auditing and other information
	required by the commission.
	(b)  The video lottery central system must be a central
	determinant system that communicates lottery outcomes from a
	central determination computer to video lottery terminals in a
	manner prescribed by the commission.
	(c)  The commission shall provide to a registered video
	lottery terminal provider or an applicant applying for a
	certificate of 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 the transmission of
	auditing information and for activation and disabling of video
	lottery terminals.
	(d)  The video lottery central system may not limit or
	preclude potential providers from providing the video lottery
	terminals, other than providers that fail to meet specifications
	established by the commission.
	(e)  The video lottery central system provider may not sell
	or distribute video lottery terminals in this state.
	(f)  The commission may contract with a video lottery central
	system provider to establish the video lottery central system.
	(g)  The commission may not contract with a person to provide
	the video lottery central system if within the preceding five years
	that person owned any interest in a racetrack or pari-mutuel
	license in this state.
	Sec. 466.507.  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.
	(b)  A person who manufactures and distributes video lottery
	terminals must obtain a separate certificate of registration or
	commission approval for each of those activities.
	(c)  Unless suspended or revoked, the certificate of
	registration or approval expires on the date specified by the
	commission, which may not be later than the fifth anniversary of the
	date of issuance of the certificate or approval.  A person may renew
	an unexpired certificate of registration or approval by paying a
	renewal fee in the amount determined by the commission to cover the
	costs of administering the renewal application and complying with
	the requirements of this subchapter and commission rule.
	(d)  To be eligible for a certificate of registration or
	commission approval as required by this section, an applicant must
	satisfy all applicable requirements under this subchapter.
	Sec. 466.508. VIDEO LOTTERY TERMINAL PROVIDER: APPLICATION;
	CHANGE IN INFORMATION.  (a)  The commission shall adopt rules
	governing the registration or approval of video lottery terminal
	providers. The rules must require:
	(1)  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; and
	(2)  the certificate of registration or approval to
	designate whether the provider is a manufacturer or distributor.
	(b)  An applicant seeking registration or approval as a video
	lottery terminal provider to manufacture and distribute video
	lottery terminals in this state may apply for both approvals or
	certificates of registration in a single application.
	(c)  An applicant for a video lottery terminal provider
	certificate of registration or approval must provide the following
	information:
	(1)  the full name and address of the applicant;
	(2)  the full name and address of each location at which
	video lottery equipment is or will be manufactured or stored in this
	state;
	(3)  the name, home address, and share of ownership of
	the applicant's substantial interest holders;
	(4)  a full description of each separate type of video
	lottery equipment that the applicant seeks to manufacture or
	distribute in this state;
	(5)  the brand name under which each type of video
	lottery equipment is to be distributed;
	(6)  if the applicant is incorporated under law other
	than the laws of this state, the applicant's irrevocable
	designation of the secretary of state as the applicant's resident
	agent for service of process and notice in accordance with the law
	of this state;
	(7)  a list of all businesses or organizations in this
	state in which the applicant has any financial interest and the
	details of that financial interest, including all arrangements
	through which a person directly or indirectly receives any portion
	of the profits of the video lottery terminal provider and
	indebtedness between the license holder and any other person, other
	than a regulated financial institution, in excess of $5,000;
	(8)  a list of all affiliated businesses or
	corporations in which the applicant or an officer, director, or
	substantial interest-holder of the applicant, either directly or
	indirectly, owns or controls as a sole proprietor or partner more
	than 10 percent of the voting stock of a publicly traded
	corporation;
	(9)  a list of all businesses or corporations licensed
	to conduct gambling activities or to supply gambling-related
	equipment, supplies, or services in which the applicant or an
	officer, director, or substantial interest-holder of the applicant
	has any interest;
	(10)  a list of all jurisdictions in which the
	applicant or an officer, director, or substantial interest-holder
	of the applicant has been licensed, registered, qualified, or
	otherwise approved to conduct gambling-related activities during
	the 10 years preceding the date of the filing of the application;
	(11)  a statement, including all related details,
	indicating whether the applicant or an officer, director, or
	substantial interest-holder of the applicant has ever had a
	license, registration, qualification, or other approval for
	gambling-related activities denied, revoked, or suspended by any
	jurisdiction or has been fined or otherwise required to pay
	penalties or monetary forfeitures for gambling-related activities
	in any jurisdiction; and
	(12)  a statement acknowledging that the applicant will
	make available for review at the time and place requested by the
	commission all records related to the ownership or operation of the
	business.
	(d)  The commission may require the following information
	from an applicant:
	(1)  personal financial and personal history records of
	all substantial interest-holders;
	(2)  all records related to the scope of activity,
	including sales of product, purchases of raw materials and parts,
	and any contracts, franchises, patent agreements, or similar
	contracts or arrangements related to manufacturing or distributing
	video lottery terminals; and
	(3)  records related to any financial or management
	control of or by customers and suppliers.
	(e)  The applicant must:
	(1)  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; and
	(2)  submit to 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.
	(f)  Not later than the 10th day after the date of any change
	in the information submitted on or with the application form, the
	applicant shall notify the commission of the change, including a
	change that occurs after the certificate of registration or other
	commission approval has been granted.
	(g)  The applicant shall comply with all federal and state
	laws, local ordinances, and rules.
	Sec. 466.509.  VIDEO LOTTERY TERMINAL PROVIDER: APPLICATION
	AND CERTIFICATE OF REGISTRATION OR APPROVAL FEE.  (a)  An applicant
	seeking certificate of registration or approval or renewal of
	registration or approval as a video lottery terminal provider must
	pay a nonrefundable application fee in the amount of $100,000 and an
	annual fee due on each anniversary of initial registration or
	approval of $100,000.
	(b)  An applicant seeking registration or approval as both a
	manufacturer and distributor must pay a separate application and
	annual fee for each registration or approval.
	(c)  Application fees paid under this section shall be
	retained by the commission to defray costs incurred in the
	administration and enforcement of this chapter relating to the
	operation of video lottery terminals.
	Sec. 466.510.  VIDEO LOTTERY RETAILER OR VIDEO LOTTERY
	MANAGER LICENSE REQUIRED.  Except as provided by Chapter 2005,
	Occupations Code, or 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.
	Sec. 466.511.  VIDEO LOTTERY RETAILER OR VIDEO LOTTERY
	MANAGER: APPLICATION AND QUALIFICATION.  (a)  An applicant for a
	video lottery retailer or video lottery manager license must apply
	to the commission under rules adopted by the commission, provide
	the information necessary to determine the applicant's eligibility
	for a license, and provide other information considered necessary
	by the commission.
	(b)  Except as provided by other law, an applicant for a
	video lottery retailer license must hold a valid racing license
	granted under the Texas Racing Act (Article 179e, Vernon's Texas
	Civil Statutes) and operate a racetrack as defined by Section
	466.002.
	(c)  An applicant for a video lottery manager license must:
	(1)  have a valid and executed contract with a
	racetrack that satisfies the requirements of Subsection (b) to act
	as a video lottery manager for the racetrack subject to licensing
	under this chapter; or
	(2)  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.
	(d)  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.
	(e)  An applicant for a video lottery retailer or video
	lottery manager license has the burden of proving qualification for
	a license by clear and convincing evidence.  In addition to
	satisfying minimum requirements established by commission rules,
	an applicant for a video lottery retailer or video lottery manager
	license must:
	(1)  be a person of good character, honesty, and
	integrity;
	(2)  be a person whose background and prior activities,
	including criminal record, reputation, habits, and associations,
	do not pose a threat to the security and integrity of video lottery
	or to the public interest of this state or to the effective
	operation and control of video lottery, or do not create or enhance
	the dangers of unsuitable, unfair, or illegal practices, methods,
	and activities in the conduct of video lottery or in the carrying on
	of the business and financial arrangements incidental to video
	lottery;
	(3)  if applying for a new license, provide
	fingerprints for a criminal records evaluation by the Texas
	Department of Public Safety or other law enforcement agency,
	including fingerprints for each person required to be named in an
	application, accompanied by a signed authorization for the release
	of information to the commission by the department of public safety
	and the Federal Bureau of Investigation;
	(4)  not have been convicted of an offense under this
	chapter or of any crime related to theft, bribery, gambling, or
	involving moral turpitude;
	(5)  demonstrate adequate business probity,
	competence, experience, and financial stability as defined by the
	commission;
	(6)  demonstrate adequate financing for the operation
	of the facility at which the video lottery terminals will be
	operated from a source that meets the requirements of this
	subchapter and is adequate to support the successful performance of
	the duties and responsibilities of the license holder and disclose
	all financing or refinancing arrangements for the purchase, lease,
	or other acquisition of video lottery equipment in the degree of
	detail requested by the commission;
	(7)  when applying for a new license or renewing a
	license under this chapter, present evidence to the commission of
	the existence and terms of any agreement regarding the proceeds
	from the operation of video lottery terminals;
	(8)  demonstrate that each substantial interest-holder
	in the applicant meets all applicable qualifications under this
	subchapter;
	(9)  provide all information, including financial data
	and documents, consents, waivers, and any other materials,
	requested by the commission for purposes of determining
	qualifications for a license; and
	(10)  as part of its application, expressly waive any
	and all claims against the commission, this state, and a member,
	officer, employee, or authorized agent of the commission or this
	state for damages resulting from any background investigation,
	disclosure, or publication relating to an application for a video
	lottery retailer or video lottery manager license.
	(f)  An application or disclosure form and any other document
	submitted to the commission by or on behalf of the applicant for
	purposes of determining qualification for a video lottery retailer
	or video lottery manager license must be sworn to or affirmed before
	an officer qualified to administer oaths.
	(g)  An applicant who knowingly fails to reveal any fact
	material to qualification for a license, finding of suitability, or
	other approval or who knowingly submits false or misleading
	material information is ineligible for a video lottery retailer or
	video lottery manager license.
	(h)  An applicant for a license or renewal of a license as a
	video lottery retailer or video lottery manager shall notify the
	commission of any change in the application information for a
	license or renewal of a license not later than the 10th day after
	the date of the change, except that a publicly traded corporation or
	other business association or entity applicant is not required to
	notify the commission of a transfer by which any person directly or
	indirectly becomes the beneficial owner of less than 10 percent of
	the stock of the corporation or association.
	(i)  Except as otherwise provided by this subchapter, the
	commission shall deny an application for a license or shall suspend
	or revoke a license if the commission finds that the applicant would
	be subject to denial or revocation of a sales agent license under
	Section 466.155.
	Sec. 466.512.  VIDEO LOTTERY RETAILER OR VIDEO LOTTERY
	MANAGER: APPLICATION AND ANNUAL LICENSE FEES.  (a)  An applicant for
	a video lottery retailer or video lottery manager license must pay a
	nonrefundable application fee in the amount of:
	(1)  $500,000 for an applicant applying to operate a
	video lottery terminal establishment at a class 1 racetrack or a
	greyhound racetrack; or
	(2)  $200,000 for an applicant applying to operate a
	video lottery terminal establishment at a class 2 or class 3
	racetrack.
	(b)  A video lottery retailer or video lottery manager must
	pay an annual license fee due on each anniversary of initial
	licensing in the amount of:
	(1)  $50,000 for a license holder operating a video
	lottery terminal establishment at a class 1 racetrack or a
	greyhound racetrack; or
	(2)  $25,000 for a license holder operating a video
	lottery terminal establishment at a class 2 or class 3 racetrack.
	(c)  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.
	(d)  The commission shall set any additional application fee
	necessary to pay the costs of determining the applicant's
	eligibility, including costs to conduct all investigations
	necessary for processing the application. An investigation may not
	begin until the applicant has submitted all required fees to the
	commission. If additional fees are required by the commission
	during the course of the investigation or processing of the
	application and are not received by the commission by the 15th day
	after the date the commission notifies the applicant of the amount
	of the fees, the investigation and evaluation processes shall be
	suspended.
	(e)  The commission shall retain an application fee paid
	under this section to defray costs incurred in the administration
	and enforcement of this chapter relating to the operation of video
	lottery terminals.
	Sec. 466.513.  VIDEO LOTTERY RETAILER OR VIDEO LOTTERY
	MANAGER: EMPLOYEE INFORMATION.  (a)  A video lottery retailer or
	video lottery manager shall provide to the commission the name and
	address of each employee involved in the operation of video lottery
	games and the name and address of the providers of surety and
	insurance required by Section 466.559.
	(b)  Not later than the 10th day following the date of the
	change, a license holder must report to the commission any change in
	an officer, partner, director, key employee, substantial
	interest-holder, video lottery game operation employee, or owner
	and any change in a surety or insurance provider.
	Sec. 466.514.  VIDEO LOTTERY TERMINAL ESTABLISHMENT:
	REQUIREMENTS; LOCATION.  (a)  A video lottery retailer or video
	lottery manager may not operate video lottery terminals at any
	place that is not licensed as a video lottery terminal
	establishment.
	(b)  The commission by rule shall establish standards for
	video lottery terminal establishments to ensure that
	establishments are accessible, safe, comfortable, durable, and of
	sufficiently high-quality construction to promote investments in
	establishments and related facilities that foster lasting economic
	development and continuity in producing state revenue, and that
	protect the health and welfare of employees, patrons, and all state
	residents. The standards must include or incorporate high-quality
	commercial building standards, including safety, air-conditioning,
	heating, and electrical standards.
	(c)  An applicant for a video lottery terminal establishment
	license must:
	(1)  consent to the application of state laws with
	exclusive venue in Travis County, Texas, related to any action
	arising out of the operation of video lottery terminals;
	(2)  provide office space for at least one commission
	employee as required by commission rule; and
	(3)  provide free and unrestricted access to the
	establishment by the commission.
	(d)  An applicant for a video lottery terminal establishment
	license must provide the maps, surveys, site plans, architectural
	plans, and financial statements required by the commission and
	update the information at least annually if required by the
	commission.
	(e)  Notwithstanding Sections 466.155 and 466.511(i), 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)  The commission may not issue a video lottery terminal
	establishment license to a racetrack if as of January 1, 2007, any
	part of the real property on which the licensed premises of the
	racetrack is located is less than one-half mile from any part of the
	real property on which a public school is located.
	Sec. 466.515.  LICENSE HOLDER AS SALES AGENT.  The holder of
	a video lottery retailer or video lottery manager license may
	operate as a sales agent for lottery tickets in accordance with this
	chapter.
	Sec. 466.516.  TERM OF LICENSE, REGISTRATION, OR APPROVAL;
	RENEWAL ELIGIBILITY.  (a)  Unless suspended or revoked, a license,
	certificate of registration, or approval issued under this
	subchapter expires:
	(1)  except as provided by Subdivision (2), on the date
	specified in the license, which may not be later than the fifth
	anniversary of the date of issuance; or
	(2)  for a video lottery retailer license held by a
	pari-mutuel license holder, on the date the person's pari-mutuel
	license expires.
	(b)  To be eligible for renewal of a license or certificate,
	an applicant must satisfy all applicable licensing, registration,
	or approval requirements under this subchapter, including payment
	of any renewal fee charged by the commission to cover costs of
	administering a renewal application.
	Sec. 466.517.  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. 466.518.  APPLICATION AS REQUEST FOR CHARACTER
	DETERMINATION.  An application under this subchapter to receive or
	renew a license, certificate of 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. 466.519.  IMMUNITY FOR STATEMENT MADE IN PROCEEDING OR
	INVESTIGATION.  Any written or oral statement made in the course of
	an official commission proceeding or investigative activities
	related to an application for commission licensing, registration,
	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. 466.520.  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. 466.521.  SUMMARY SUSPENSION OF VIDEO LOTTERY RETAILER
	OR VIDEO LOTTERY MANAGER LICENSE; TERMINAL DISABLED.  (a)  The
	commission may summarily suspend the license of a video lottery
	retailer or video lottery manager without notice or hearing if the
	commission finds the action is necessary to maintain the integrity,
	security, honesty, or fairness of the operation or administration
	of the lottery or to prevent financial loss to this state and:
	(1)  the license holder fails to deposit money received
	from video lottery terminal operations as required by this chapter
	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 operation as
	required if the license is being summarily suspended under this
	section; or
	(3)  an act or omission occurs that, under commission
	rules, justifies the termination of video lottery terminal
	operations to:
	(A)  protect the integrity of the lottery or the
	public health, welfare, or safety; or
	(B)  prevent financial loss to this state.
	(d)  The commission shall immediately disable a video
	lottery terminal if necessary to protect the public health,
	welfare, or safety.
	Sec. 466.522.  LICENSING, REGISTRATION, SUITABILITY, AND
	REGULATORY APPROVAL AS REVOCABLE PERSONAL PRIVILEGES.  (a)  An
	applicant for a license, certificate of registration, suitability,
	or other affirmative regulatory approval under this subchapter does
	not have any right to the license, certificate of registration,
	suitability, or approval sought.
	(b)  Any license, certificate of registration, or
	suitability or other regulatory approval granted under this
	subchapter is a revocable privilege, and a holder of the privilege
	does not acquire any vested right in or under the privilege.
	(c)  The courts of this state do not have jurisdiction to
	review a decision to deny, limit, or condition the license,
	registration, suitability, or approval unless the judicial review
	is sought on the ground that the denial, limitation, or condition is
	based on a suspect classification, such as race, color, religion,
	sex, or national origin, in violation of the Equal Protection
	Clause of the Fourteenth Amendment to the United States
	Constitution. The state court must affirm the commission's action
	unless the violation is proven by clear and convincing evidence.  If
	a state court has jurisdiction over a claim under this section, then
	this state's sovereign immunity is waived only to the extent
	expressly provided by Section 466.572.
	(d)  A license, certificate of registration, suitability, or
	regulatory approval granted or renewed under this subchapter may
	not be transferred or assigned to another person, and a license,
	registration, suitability, or approval may not be pledged as
	collateral. The purchaser or successor of a person who has been
	granted a license, certificate of registration, suitability, or
	regulatory approval must independently qualify for a license,
	certificate, suitability, or approval required by this subchapter.
	(e)  The following acts void the license, certificate,
	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. 466.523.  CAPITAL INVESTMENTS AND IMPROVEMENT
	REQUIREMENTS FOR VIDEO LOTTERY TERMINAL ESTABLISHMENT.  (a)  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.
	(b)  The commission may not issue a license for the operation
	of a video lottery terminal establishment at a class 2 racetrack
	that has not made at least $40 million in capital investments or
	improvements to new or existing facilities at the racetrack.
	Sec. 466.524.  LIST OF AUTHORIZED VIDEO LOTTERY PROVIDERS,
	GAMES, AND TERMINALS.  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. 466.525.  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. 466.526.  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 up to four working models of
	a video lottery terminal to be transported to a location designated
	by the commission for testing, examination, and analysis.  The
	video lottery terminal provider shall pay all the costs of testing,
	examination, analysis, and transportation of the models. The
	testing, examination, and analysis of video lottery terminals may
	require dismantling of the terminal, and some tests may result in
	damage or destruction to one or more electronic components of the
	model. The commission may require a video lottery terminal
	provider to provide specialized equipment or pay for an independent
	technical expert or laboratory to test the terminal.
	(c)  The video lottery terminal provider shall pay the cost
	of transporting up to four video lottery terminals to the
	headquarters of the commission or a location designated by the
	commission. The commission shall conduct an acceptance test to
	determine terminal functions and compatibility with the video
	lottery central system. At the expense of the video lottery
	terminal provider, the commission may contract with an independent
	technical expert or laboratory to determine compatibility and
	terminal functions. If the video lottery terminal fails the
	acceptance test conducted by the commission, the video lottery
	terminal provider shall make all modifications required by the
	commission before distribution in this state.
	(d)  After each test under this section has been completed,
	the commission shall provide the video lottery terminal provider
	with a report containing findings, conclusions, and pass or fail
	results. The report may contain recommendations for modifications
	to bring a video lottery terminal into compliance with this chapter
	and commission standards.
	(e)  Before approving a particular video lottery terminal
	model, the commission may require a field trial period not to exceed
	60 days for a licensed video lottery terminal establishment to test
	the terminal. During the trial period, modifications may not be
	made to the video lottery terminal model unless approved by the
	commission.
	Sec. 466.527.  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 other 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 exact specifications of the video lottery terminal prototype
	tested and approved by the commission.
	Sec. 466.528.  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 and that a malfunctioning terminal not
	repaired and returned to play within 30 days or as otherwise
	prescribed by the commission be disposed of in compliance with
	Section 466.531(b).
	(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.
	Sec. 466.529.  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 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 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 credit 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 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.
	(c)  The commission may reject any instructions for play
	required under Subsection (b)(5) that the commission determines to
	be incomplete, confusing, or misleading.
	Sec. 466.530.  VIDEO LOTTERY TERMINALS:  HOURS OF OPERATION;
	COMMUNICATION; LOCATION.  (a)  The hours of operation for video
	lottery terminals are subject to restrictions or other conditions
	provided by commission rules.
	(b)  The commission by rule may prescribe restrictions or
	conditions on the hours of video lottery terminal operations for
	purposes determined by the commission, including 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, placement or
	movement of video lottery terminals in a video lottery terminal
	establishment must be consistent with a commission-approved video
	lottery terminal establishment floor plan.
	Sec. 466.531.  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 and, if taken out of use and play, must immediately
	be sold or otherwise transferred to a registered video lottery
	terminal provider or another person in a jurisdiction outside this
	state for use in that jurisdiction.
	Sec. 466.532.  VIDEO LOTTERY TERMINALS:  MAXIMUM NUMBER.
	(a)  The commission by rule shall establish the maximum number of
	video lottery terminals that may be operated at each video lottery
	terminal establishment operated by a video lottery retailer or
	video lottery manager based on factors prescribed by commission
	rule, including demographics, to ensure that the number of permits
	to operate video lottery terminals requested by the retailer or
	manager is not detrimental to the public health, safety, welfare,
	and economic development of this state and will result in the
	optimization of revenue to fund state governmental programs.
	(b)  The commission shall determine the number of video
	lottery terminals that may be operated by an Indian tribe in
	connection with the tribe's video lottery system in accordance with
	the applicable gaming agreement entered into pursuant to this
	chapter and the criteria prescribed by Subsection (a).
	Sec. 466.533.  REGISTRATION OF VIDEO LOTTERY TERMINALS. (a)
	A video lottery retailer or video lottery manager may not operate or
	display a video lottery terminal for play in this state unless the
	terminal is annually registered with the commission in accordance
	with this section and the certificate of registration is affixed to
	the terminal.
	(b)  To obtain a certificate of registration under this
	section, a person must:
	(1)  file with the commission a registration
	application on a form prescribed by the commission; and
	(2)  pay a $1,000 registration fee to the commission
	for each video lottery terminal that is the subject of the
	application.
	(c)  Chapter 2153, Occupations Code, does not apply to a
	video lottery terminal.
	Sec. 466.534.  LICENSE AND REGISTRATION INVESTIGATIVE TRUST
	FUND.  (a)  The investigative trust fund is created as a trust fund
	to pay all expenses incurred by the commission related to oversight
	investigations of applicants for a license, certificate of
	registration, or approval and of license, certificate, or approval
	holders.
	(b)  The commission shall determine the amount initially
	deposited and the amount maintained in the fund by each applicant or
	license, certificate, or approval holder and shall administer the
	money in the fund as a revolving fund available to the commission.
	(c)  If the commission does not receive the initial deposit
	required by Subsection (b) before the 30th day following the date
	the commission notifies the applicant or license, registration, or
	approval holder of the initial deposit amount, the commission may
	not issue or renew the license, certificate, or approval.  The
	investigative trust fund is in the state treasury and is held in
	trust with the comptroller's treasury operations division.
	(d)  Expenses may be advanced from the investigative fund,
	and expenditures may be made from the fund without regard to any
	other state law regarding travel expenses of state employees.
	(e)  The commission at least quarterly shall provide each
	applicant or license, certificate, or approval holder a written
	accounting of the costs and charges incurred in oversight
	investigations for that applicant or holder. An applicant or a
	license, certificate, or approval holder shall deposit money not
	later than the 10th day after receipt of the accounting to maintain
	the fund balance required by the commission.
	(f)  If an applicant for a license, certificate of
	registration, or approval is not licensed, registered, or approved,
	or if a license, registration, or approval is not renewed, the
	commission shall refund to the applicant or holder any balance in
	the fund paid by the applicant or holder not offset by costs
	incurred in an investigation for that applicant or holder.
	Sec. 466.535.  CONSENT TO COMMISSION DETERMINATION.  (a)  An
	application for a license, certificate of registration, finding of
	suitability, or other approval under this chapter 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. 466.536.  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 to:
	(1)  deny any application or limit, condition,
	restrict, revoke, or suspend any license, certificate of
	registration, or finding of suitability or approval; and
	(2)  fine any person licensed, registered, found
	suitable, or approved for any cause deemed reasonable by the
	commission.
	Sec. 466.537.  WAIVER OF REQUIREMENTS.  (a)  The commission
	may waive, either selectively or by general rule, one or more of the
	requirements of Sections 466.508 and 466.511 if the commission
	makes a written finding that the waiver is consistent with the
	policy of this state, the public health, safety, and welfare, and
	the integrity of the lottery.
	(b)  The commission may waive any requirement under this
	chapter for a finding of suitability of an institutional investor
	that is a substantial interest holder with respect to the
	beneficial ownership of the voting securities of a publicly traded
	corporation if the institutional investor holds the securities for
	investment purposes only and applies for a waiver in compliance
	with Section 466.538 and commission rules.
	(c)  An institutional investor is not eligible for the
	waiver, except as otherwise provided by Subsection (f), if the
	institutional investor beneficially owns, directly or indirectly,
	more than 15 percent of the voting securities and if any of the
	voting securities were acquired other than through a debt
	restructuring.
	(d)  Voting securities acquired before a debt restructuring
	and retained after a debt restructuring or as a result of an
	exchange, exercise, or conversion after a debt restructuring, or
	any securities issued to the institutional investor through a debt
	restructuring, are considered to have been acquired through a debt
	restructuring.
	(e)  A waiver granted under Subsection (b) is effective only
	as long as the institutional investor's direct or indirect
	beneficial ownership interest in the voting securities meets the
	limitations set forth in this section, and if the institutional
	investor's interest exceeds the limitation at any time, the
	investor is subject to the suitability findings required under this
	subchapter.
	(f)  An institutional investor that has been granted a waiver
	under Subsection (b) may beneficially own more than 15 percent, but
	not more than 19 percent, of the voting securities of a publicly
	traded corporation registered with or licensed by the commission
	only:
	(1)  if the additional ownership results from a stock
	repurchase program conducted by the publicly traded corporation;
	and
	(2)  on the conditions that:
	(A)  the institutional investor does not purchase
	or otherwise acquire any additional voting securities of the
	publicly traded corporation that would result in an increase in the
	institutional investor's ownership percentage; and
	(B)  the institutional investor reduces its
	ownership percentage of the publicly traded corporation to 15
	percent or less before the first anniversary of the date the
	institutional investor receives constructive notice that it
	exceeded the 15 percent threshold, based on any public filing by the
	corporation with the United States Securities and Exchange
	Commission.
	(g)  The one-year period under Subsection (f)(2)(B) may be
	extended for a reasonable time on commission approval.
	(h)  An institutional investor may not be considered to hold
	voting securities of a publicly traded corporation for investment
	purposes only unless the voting securities were acquired and are
	held in the ordinary course of business as an institutional
	investor and not for the purpose of causing, directly or
	indirectly, the election of a majority of the members of the board
	of directors, any change in the corporate charter, bylaws,
	management, policies, or operations of the corporation registered
	with or licensed by the commission or any of its gaming affiliates,
	or any other action which the commission finds to be inconsistent
	with investment purposes only. The following activities may not be
	considered to be inconsistent with holding voting securities for
	investment purposes only:
	(1)  voting, directly or indirectly through the
	delivery of a proxy furnished by the board of directors, on all
	matters voted on by the holders of the voting securities;
	(2)  serving as a member of any committee of creditors
	or security holders formed in connection with a debt restructuring;
	(3)  nominating any candidate for election or
	appointment to the board of directors in connection with a debt
	restructuring;
	(4)  accepting appointment or election as a member of
	the board of directors in connection with a debt restructuring and
	serving in that capacity until the conclusion of the member's term;
	(5)  making financial and other inquiries of management
	of the type normally made by securities analysts for information
	purposes and not to cause a change in management, policies, or
	operations; or
	(6)  any other activity the commission determines to be
	consistent with the investment intent.
	(i)  For purposes of this section, "debt restructuring"
	means:
	(1)  a proceeding under the United States Bankruptcy
	Code; or
	(2)  any out-of-court reorganization of a person that
	is insolvent or generally unable to pay the person's debts as they
	become due.
	Sec. 466.538.  WAIVER APPLICATION REQUIREMENTS.  An
	application for a waiver under Section 466.537(b) must include:
	(1)  a description of the institutional investor's
	business and a statement as to why the institutional investor meets
	the definition of an institutional investor set forth in this
	chapter;
	(2)  a certification, made under oath and penalty of
	perjury, that:
	(A)  states that the voting securities were
	acquired and are held for investment purposes only in accordance
	with Section 466.537;
	(B)  provides that the applicant agrees to be
	bound by and comply with this chapter and the rules adopted under
	this chapter, to be subject to the jurisdiction of the courts of
	this state, and to consent to this state as the choice of forum in
	the event any dispute, question, or controversy arises regarding
	the application or any waiver granted under Section 466.537(b); and
	(C)  includes a statement by the signatory
	explaining the basis of the signatory's authority to sign the
	certification and bind the institutional investor to its terms;
	(3)  a description of all actions, if any, taken or
	expected to be taken by the institutional investor related to the
	activities described in Section 466.537(f);
	(4)  the names, addresses, telephone numbers, dates of
	birth, and social security numbers of:
	(A)  the officers and directors of the
	institutional investor or the officers' and directors' equivalents;
	and
	(B)  the persons that have direct control over the
	institutional investor's holdings of voting securities of the
	publicly traded corporation registered with or licensed by the
	commission;
	(5)  the name, address, telephone number, date of
	birth, and social security number or federal tax identification
	number of each person who has the power to direct or control the
	institutional investor's exercise of its voting rights as a holder
	of voting securities of the publicly traded corporation registered
	with or licensed by the commission;
	(6)  the name of each person that beneficially owns
	more than five percent of the institutional investor's voting
	securities or other equivalent;
	(7)  a list of the institutional investor's affiliates;
	(8)  a list of all securities of the publicly traded
	corporation registered with or licensed by the commission that are
	or were beneficially owned by the institutional investor or its
	affiliates in the preceding year, including a description of the
	securities, the amount of the securities, and the date of
	acquisition or sale of the securities;
	(9)  a list of all regulatory agencies with which the
	institutional investor or any affiliate that beneficially owns
	voting securities of the publicly traded corporation registered
	with or licensed by the commission files periodic reports, and the
	name, address, and telephone number of the person, if known, to
	contact at each agency regarding the institutional investor;
	(10)  a disclosure of all criminal or regulatory
	sanctions imposed during the preceding 10 years and of any
	administrative or court proceedings filed by any regulatory agency
	during the preceding five years against the institutional investor,
	its affiliates, any current officer or director, or any former
	officer or director whose tenure ended within the preceding 12
	months, except that for a former officer or director, the
	information need be provided only to the extent that it relates to
	actions arising out of or during the person's tenure with the
	institutional investor or its affiliates;
	(11)  a copy of the institutional investor's most
	recent Schedule 13D or 13G and any amendments to that schedule filed
	with the United States Securities and Exchange Commission
	concerning any voting securities of the publicly traded corporation
	registered with or licensed by the commission;
	(12)  a copy of any filing made under the Securities
	Exchange Act of 1934 (15 U.S.C. Section 78a et seq.) with respect to
	the acquisition or proposed acquisition of voting securities of the
	publicly traded corporation registered with or licensed by the
	commission; and
	(13)  any additional information the commission may
	request.
	Sec. 466.539.  CHANGE IN INVESTMENT FOLLOWING WAIVER;
	NOTICE.  (a)  An institutional investor that has been granted a
	waiver of a finding of suitability under Section 466.537 and that
	subsequently intends not to hold the investor's voting securities
	of the publicly traded corporation for investment purposes only or
	that intends to take any action inconsistent with the investor's
	prior intent shall, not later than the second business day after the
	date of the decision, deliver notice to the commission in writing of
	the change in the investor's investment intent. The commission may
	then take any action the commission considers appropriate.
	(b)  If the commission finds that an institutional investor
	has failed to comply with this chapter or should be subject to a
	finding of suitability to protect the public interest, the
	commission may require the institutional investor to apply for a
	finding of suitability.
	(c)  Any publicly traded corporation registered with or
	licensed by the commission shall immediately notify the commission
	of any information about, fact concerning, or actions of an
	institutional investor holding any of its voting securities that
	may materially affect the institutional investor's eligibility to
	hold a waiver under Section 466.537.
	Sec. 466.540.  EFFECT OF DENIAL OF LICENSE OR REGISTRATION.
	(a)  A person whose application for a license or certificate of
	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 related to the operation of video lottery
	terminals in this state between a person holding a license or
	certificate of registration and a person denied a license or
	registration must be terminated immediately. If the person denied
	a license or certificate has previously been granted a temporary
	license or certificate, the temporary license or certificate
	expires immediately on denial of the permanent license or
	certificate.
	(c)  Except as otherwise authorized by the commission, a
	person denied a license or certificate of registration may not
	reapply for any license or certificate before the second
	anniversary of the date of the denial.
	Sec. 466.541.  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 chapter, 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 chapter;
	(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. 466.542.  RACETRACK REQUIREMENTS.  (a)  Except as
	provided by other law or this section, a video lottery retailer at
	all times must hold a valid pari-mutuel wagering license.  The
	commission may allow a video lottery retailer whose pari-mutuel
	wagering license has lapsed or been revoked, suspended, or
	surrendered to reapply for a license in order to operate the video
	lottery terminal establishment or by rule may establish a period
	not to exceed two years during which time the video lottery terminal
	establishment may be operated pending acquisition by a person
	qualified and licensed under this chapter to operate video lottery
	terminals.
	(b)  If a video lottery retailer is not licensed as required
	by Subsection (a) before the second anniversary of the date a
	license lapses or is revoked, suspended, or surrendered or a new
	video lottery manager or video lottery retailer is not licensed and
	authorized to operate the facility before the second anniversary,
	the racetrack shall permanently lose eligibility under this chapter
	to operate video lottery terminals.
	(c)  Subject to the commission's discretion, a video lottery
	retailer may continue to operate the video lottery terminal
	establishment after the second anniversary of the date a license
	lapses or is revoked, suspended, or surrendered only to satisfy the
	establishment's existing outstanding debt attributable to video
	lottery operation.
	Sec. 466.543.  PRIZE RULES.  The commission shall adopt
	rules governing:
	(1)  the amount a player may be charged to play each
	video lottery game; and
	(2)  the prizes and credits that may be awarded to the
	player of a video lottery game.
	Sec. 466.544.  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 real-time communication
	between each video lottery terminal and the video lottery central
	system.
	Sec. 466.545.  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; 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 specific locations in the video lottery
	terminal establishment that are consistent with the retailer's or
	manager's commission-approved floor plan;
	(6)  monitor video lottery terminals to prevent a
	person who is under 21 years of age or who is visibly intoxicated
	from placing a wager;
	(7)  refuse to accept a credit card payment from a
	player for the exchange or purchase of video lottery game credits or
	for an advance of coins, currency, vouchers, or tokens to be used by
	a player to play video lottery games, refuse to extend credit, in
	any manner, to a player that enables the player to play a video
	lottery game, and ensure that any person doing business at the video
	lottery terminal establishment, including a person operating or
	managing an auxiliary service such as a restaurant, refuses to
	accept a credit card payment or to extend credit in a manner
	prohibited by this subdivision, except that:
	(A)  a license holder may cash a check for a player
	if the license holder exercises reasonable caution cashing the
	check and does not cash checks for any player in an amount exceeding
	$1,000 in any 24-hour period; and
	(B)  an automated teller machine may be located at
	a video lottery terminal establishment in compliance with the Texas
	Racing Act (Article 179e, Vernon's Texas Civil Statutes) or an
	effective gaming agreement;
	(8)  pay all credits won by a player on presentment of a
	valid winning video lottery game ticket;
	(9)  conduct only the video lottery game advertising
	and promotional activities consistent with criteria prescribed by
	the commission, which must prohibit undue influence, offensive
	language, and anything that would affect the integrity of video
	lottery operation;
	(10)  install, post, and display prominently at the
	licensed location redemption information and other informational
	or promotional materials as required by the commission;
	(11)  maintain general liability insurance coverage
	for the video lottery terminal establishment and all video lottery
	terminals in the amounts required by the commission;
	(12)  assume liability for money lost or stolen from
	any video lottery terminal; and
	(13)  annually submit an audited financial statement to
	the commission in a format approved by the commission.
	Sec. 466.546.  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. 466.547.  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 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. 466.548.  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 and shall
	be instructed to ask the players to leave the establishment. Signs
	and other materials shall be readily available to direct compulsive
	players to agencies that offer appropriate counseling.
	Sec. 466.549.  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. 466.550.  COMMISSION APPROVAL REQUIRED FOR PROCEDURES
	AND ADMINISTRATIVE AND ACCOUNTING CONTROLS.  (a)  The commission's
	approval is required for:
	(1)  all internal procedures and administrative and
	accounting controls of a video lottery retailer or video lottery
	manager; and
	(2)  all internal procedures and administrative and
	accounting controls of a video lottery terminal provider that
	relate to the manufacturing and distribution of video lottery
	terminals to be used in this state.
	(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. 466.551.  FINANCIAL AND OPERATING INFORMATION.  A video
	lottery retailer or video lottery manager shall submit financial
	and operating information and statistical data to the commission in
	a format approved by the commission in order for the financial
	operating position of the retailer or manager and performance and
	trends of the video lottery game industry in this state to be
	evaluated.
	Sec. 466.552.  VIDEO LOTTERY TERMINAL EVENTS.  A video
	lottery retailer or video lottery manager shall keep a database of
	video lottery terminal events. The commission by rule shall
	determine what constitutes a video lottery terminal event for
	purposes of this section.
	Sec. 466.553.  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(c).
	(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,
	independent contractor, or lobbyist for the advocacy of the
	adoption or amendment of a law related to gaming or lottery
	activities or the furtherance of gaming or lottery activities in
	any jurisdiction or as otherwise specified by commission rule.
	Sec. 466.554.  REPORT OF VIOLATIONS.  A person who holds a
	license or certificate of 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
	certificate holder, by an employee of a license or certificate
	holder, or by any person on the premises of a video lottery terminal
	establishment, whether or not associated with the license or
	certificate holder.
	Sec. 466.555.  SECURITY.  (a)  In addition to the security
	provisions applicable under Section 466.020, a video lottery
	retailer or video lottery manager shall:
	(1)  continuously monitor all video lottery terminals
	through the use of a closed-circuit television system that records
	activity for a continuous 24-hour period, retain all videotapes or
	other media used to store video images for at least 30 days, and
	make the tapes or media available to the commission on request;
	(2)  submit for commission approval a security plan and
	a floor plan of the area where video lottery terminals are operated
	showing video lottery terminal locations and security camera mount
	locations; and
	(3)  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. 466.556.  VIDEO LOTTERY TERMINAL ESTABLISHMENT:
	COMMISSION RIGHT TO ENTER.  The commission or the commission's
	representative, after displaying appropriate identification and
	credentials, has the free and unrestricted right to:
	(1)  enter the premises of a video lottery terminal
	establishment;
	(2)  enter any other locations involved in operation or
	support of video lottery games at all times to examine the systems;
	and
	(3)  inspect and copy the records of a video lottery
	retailer or video lottery manager pertaining to the operation of
	video lottery games.
	Sec. 466.557.  APPOINTMENT OF SUPERVISOR.  (a)  The
	commission by rule may provide for the appointment of a supervisor
	to manage and operate a video lottery terminal establishment at the
	direction of the commission and perform any act that a video lottery
	retailer or video lottery manager is entitled to perform in the
	event that:
	(1)  a video lottery retailer license or other license
	required for operation of the establishment is revoked or
	suspended, lapses, or is surrendered;
	(2)  a video lottery terminal establishment has been
	conveyed or transferred to a secured party receiver or trustee who
	does not hold the licenses necessary to operate the establishment;
	or
	(3)  any other event occurs that causes the
	establishment to cease the operation of video lottery terminals.
	(b)  The rules may allow the commission to:
	(1)  take any action or adopt any procedure necessary
	to operate a video lottery terminal establishment pending the
	licensing of a video lottery retailer, video lottery manager, the
	video lottery establishment, or a successor on the transfer or sale
	of the establishment or property; and
	(2)  if necessary to continue the operation of the
	video lottery establishment, sell the establishment to a person
	that holds or has applied for the licenses required to operate the
	establishment under this subchapter and make appropriate
	distributions of the proceeds of the sale.
	Sec. 466.558.  OFFENSE: CONVEYANCE OF VIDEO LOTTERY TERMINAL
	ESTABLISHMENT PROPERTY.  (a)  A person commits an offense if during
	the pendency of any proceeding before the commission that may
	result in the appointment of a supervisor or during the period of
	supervision the person:
	(1)  sells, leases, or otherwise conveys for less than
	full market value or pledges as security any property of a video
	lottery terminal establishment; or
	(2)  removes from this state or secretes from the
	commission or the supervisor any property, money, books, or records
	of the video lottery terminal establishment, including evidences of
	debts owed to the establishment.
	(b)  An offense under Subsection (a) is a felony of the third
	degree.
	Sec. 466.559.  INDEMNIFICATION, INSURANCE, AND BONDING
	REQUIREMENTS.  (a)  A license or certificate 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 certificate holder, the
	commission, this state, and the members, officers, employees, and
	authorized agents of this state or the commission arising from the
	license or certificate holder's participation in the video lottery
	system authorized under this chapter.
	(b)  Surety and insurance required under this subchapter
	shall be issued by companies or financial institutions financially
	rated "A" or better as rated by A.M. Best Company or other rating
	organization designated by the commission and duly licensed,
	admitted, and authorized to conduct business in this state, or by
	other surety approved by the commission.
	(c)  The commission shall be named as the obligee in each
	required surety and as an additional insured in each required
	insurance contract.
	(d)  A video lottery retailer or video lottery manager may
	not be self-insured with regard to video lottery terminal
	operations under this section.
	(e)  The commission by rule shall establish minimum
	insurance coverage requirements for a video lottery retailer, video
	lottery manager, or video lottery terminal provider, including:
	(1)  insurance for performance;
	(2)  insurance against losses caused by fraudulent or
	dishonest acts by an officer or employee of a video lottery
	retailer, video lottery manager, or video lottery terminal
	provider;
	(3)  general liability insurance;
	(4)  property insurance;
	(5)  liability insurance for drivers and vehicles
	employed by a video lottery retailer or video lottery manager; and
	(6)  crime insurance for the location.
	Sec. 466.560.  LIABILITY FOR CREDIT AWARDED OR DENIED;
	PLAYER DISPUTE.  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.
	Sec. 466.561.  STATE VIDEO LOTTERY ACCOUNT.  (a)  The
	commission shall deposit money 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.  Except as otherwise provided by this
	subchapter, money in the account may be used solely to fund state
	governmental programs and the administration of the video lottery
	system.
	(b)  Not more than two percent of the net terminal income
	received by this state under Section 466.562 may be used to defray
	expenses incurred in administering this chapter related to video
	lottery games, including expenses incurred to operate the video
	lottery central system.
	Sec. 466.562.  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)  net terminal income generated from the operation
	of video lottery terminals at a video lottery terminal
	establishment shall be distributed 65 percent to the establishment
	and 35 percent to this state; and
	(2)  net terminal income generated from the operation
	of video lottery terminals on Indian lands under a gaming agreement
	authorized under this subchapter shall be distributed in accordance
	with the gaming agreement.
	(b)  The amount of $10 million of the net terminal income
	received by this state under Subsection (a)(1) in each fiscal year
	shall be transferred in equal monthly installments to the Texas
	Racing Commission to fund a compulsive gambling program established
	by the racing commission.
	(c)  The amount of $10 million of the net terminal income
	received by this state under Subsection (a)(1) in each fiscal year
	shall be transferred in equal monthly installments to the criminal
	justice planning fund for use by the criminal justice division of
	the governor's office to assist in the prosecution of offenses
	under Chapter 47, Penal Code.
	(c-1)  Except as otherwise provided by Subsection (c-2):
	(1)  one-quarter of one percent of the net terminal
	income received by this state under Subsection (a)(1) shall be
	allocated to the municipality in which the video lottery terminal
	establishment is located; and
	(2)  one-quarter of one percent of the net terminal
	income received by this state under Subsection (a)(1) shall be
	allocated to the county in which the video lottery terminal
	establishment is located.
	(c-2)  If a video lottery terminal establishment is located
	in an unincorporated area, one-half of one percent of the net
	terminal income received by this state under Subsection (a)(1)
	shall be allocated to the county in which the establishment is
	located.
	(c-3)  Two percent of the net terminal income received by
	this state under Subsections (a) and (b) shall be transferred to 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 Association
	sanctioned events; and
	(4)  20 percent to the Department of Agriculture to
	promote the agricultural industry in this state.
	(d)  The commission shall require a video lottery retailer or
	video lottery manager to establish a separate electronic funds
	transfer account for depositing money from video lottery terminal
	operations, making payments to the commission or its designee, and
	receiving payments from the commission or its designee.
	(e)  A video lottery retailer or video lottery manager may
	not make payments to the commission in cash.  As authorized by the
	commission, a video lottery retailer or video lottery manager may
	make payments to the commission by cashier's check.
	(f)  The commission at least daily shall transfer this
	state's share of net terminal income of a video lottery retailer or
	video lottery manager to the commission through the electronic
	transfer of the money.
	(g)  The commission by rule shall establish 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.
	(h)  Unless otherwise directed by the commission, a video
	lottery retailer or a video lottery manager shall maintain in its
	account this state's share of the net terminal income from the
	operation of video lottery terminals, to be electronically
	transferred by the commission on dates established by the
	commission.  On a license holder's failure to maintain this
	balance, the commission may disable all of a license holder's video
	lottery terminals until full payment of all amounts due is made.
	Interest shall accrue on any unpaid balance at a rate consistent
	with the amount charged under Section 111.060, Tax Code. The
	interest shall begin to accrue on the date payment is due to the
	commission.
	(i)  In the commission's sole discretion, rather than
	disable a license holder's video lottery terminals, 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 10 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.
	(j)  A video lottery retailer or video lottery manager is
	solely responsible for resolving any income discrepancies between
	actual money collected and the net terminal income reported by the
	video lottery central system. Unless an accounting discrepancy is
	resolved in favor of the video lottery retailer or video lottery
	manager, the commission may not make any credit adjustments. Any
	accounting discrepancies which cannot otherwise be resolved shall
	be resolved in favor of the commission.
	(k)  A video lottery retailer and video lottery manager shall
	remit payment as directed by the commission if the electronic
	transfer of money is not operational or the commission notifies the
	license holder that other remittance is required. The license
	holder shall report this state's share of net terminal income, and
	remit the amount generated from the terminals during the reporting
	period.
	Sec. 466.563.  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