Understanding Gambling Laws in Texas and the US

Did you know that as of early 2025, 38 states, including Washington, D.C., and Puerto Rico, have legalized sports betting in some capacity? This booming industry has transformed markets across the U.S., especially in places like New Jersey and Nevada. Yet, when it comes to Texas, one of the largest and most influential states, gambling laws are still among the strictest in the country.

If you’re planning to expand an online gaming platform or start a casino business, it’s important to understand U.S. gambling laws. Texas, with its strict rules, can create challenges for your plans. In this blog, we’ll explain the key federal and state laws, why Texas is so restrictive, and what’s legal and what’s not. We’ll also look at the bigger picture for the gambling industry.

How Gambling Laws Work in the United States

The U.S. government allows each state to determine its own gambling laws. However, federal laws create the framework that states must follow.

Here are the key federal laws that impact gambling businesses like yours:

1. The Wire Act (1961)

Originally enacted to combat organised crime, the Wire Act prohibits the use of wire communications for transmitting bets or wagering information across state lines. While it was initially intended to target sports betting, its application has been a subject of legal debate.

In 2011, the Department of Justice (DOJ) concluded that the Wire Act applied only to sports gambling. However, in 2018, the DOJ reversed this opinion, stating that the Wire Act’s prohibitions extended beyond sports betting to include all forms of online gambling. This shift has significant implications for online gaming platforms operating across state lines.

2. The Unlawful Internet Gambling Enforcement Act (UIGEA, 2006)

The UIGEA focuses on financial transactions, making it illegal for payment processors, banks, and financial institutions to process payments related to unlawful Internet gambling.

It’s important to note that the UIGEA does not define which types of online gambling are illegal; this determination is left to state laws. Therefore, while the UIGEA restricts financial transactions, it doesn’t outright prohibit online gambling, leaving the legality of specific gambling activities to state jurisdictions.

The Supreme Court’s 2018 Ruling on Sports Betting

Prior to 2018, the Professional and Amateur Sports Protection Act (PASPA) effectively banned sports betting nationwide, except in certain states. In May 2018, the Supreme Court ruled that PASPA violated the Tenth Amendment by commandeering state legislative authority, thereby declaring it unconstitutional.

This landmark decision allowed states to legalise and regulate sports betting within their borders. As of now, over 30 states have legalised sports betting in some form, though Texas has not yet done so. Let’s look at laws in Texas in detail.

Texas Gambling Laws: What’s Legal and What’s Not

Texas is known for having some of the strictest gambling laws in the United States, with the state constitution banning most forms of gambling. While this creates significant barriers, there are still a few legal opportunities for businesses in the gaming industry.

Here’s a breakdown of what you can legally operate in Texas and what remains off-limits:

Legal Forms of Gambling in Texas

1. The Texas Lottery

The Texas Lottery is a state-run initiative that has been in operation since 1991. It offers scratch-off tickets, Powerball, and Mega Millions, with proceeds directed to public education.

Established in 1991, the Texas Lottery has generated over $40 billion in revenue since its inception, with more than $34 billion directed toward public education.

In fiscal year 2022, the Texas Lottery achieved sales of $8.297 billion, marking a 2.3% increase from the previous year.

Funds are allocated as follows:

65% for prizes
25% to the Foundation School Fund for public education
5% as retailer commissions
3% for administrative costs
2% for veterans’ assistance and other state programs.

Understanding the lottery’s structure and success could provide valuable insights into consumer preferences and regulatory requirements if you are looking to venture into state-run gaming.

2. Horse and Greyhound Racing (Pari-Mutuel Wagering)

The Texas Racing Act of 1986 established the Texas Racing Commission to oversee horse and greyhound racing, including the regulation of pari-mutuel wagering.

Pari-mutuel wagering is legal at licensed racetracks. However, the industry has seen a decline, with limited operational tracks and reduced public interest.

House Bill 5013, introduced in March 2025, aims to expand and regulate pari-mutuel wagering across various counties, allowing local elections to determine its permissibility.

This presents a niche market for exploring virtual horse racing games or related digital experiences.

3. Charitable Bingo and Raffles

Nonprofit organisations can conduct bingo games and raffles under strict guidelines set by the Texas Lottery Commission.

You must adhere to specific rules to ensure transparency and proper allocation of proceeds, primarily benefiting charitable causes.

4. Tribal Casinos

A few Native American tribes operate casinos in Texas, offering limited gaming options such as bingo and electronic gaming machines.

The Kickapoo Lucky Eagle Casino in Eagle Pass is the largest, providing a range of gaming experiences.

What remains illegal? Casino gambling, online casinos, and most forms of private betting. Even poker games, including Texas Hold ’Em, are technically illegal unless played in a social setting with no house taking a cut. Let’s look at illegal forms of gambling in Texas in a little more detail.

Illegal Forms of Gambling in Texas

Casino Gambling: Traditional casino games like blackjack, roulette, and slot machines are illegal under current Texas law.
Online Casinos: Operating or participating in online casino games is prohibited in Texas, posing challenges for online gaming platforms targeting the state.
Private Betting: Unregulated private betting, including certain poker games, is illegal unless conducted in a private setting without a house taking a cut.

Can You Operate an Online Casino in Texas?

Right now, online casinos and online poker are not legal in Texas. However, many Texans use offshore gambling sites, which exist in a legal grey area. While no one has been prosecuted for playing on these sites, running an online gambling operation in Texas could lead to legal trouble.

What About Sports Betting?

Many states have legalized sports betting since the Supreme Court’s 2018 ruling, but Texas remains opposed. While there have been efforts to legalize sports betting, political opposition is strong. In 2023, a bill to allow online sports betting was introduced but failed to pass in the state Senate.

Supporters of legal sports betting, including major Texas sports teams and former Governor Rick Perry, argue that Texans already engage in billions of dollars worth of illegal sports betting. Legalization could generate tax revenue and create a safer betting environment. However, opponents worry about gambling addiction and its impact on Texas communities.

What This Means for Your Business

Operating in Texas can present several unique challenges for businesses in the gaming industry. Understanding these hurdles is key to navigating the market and finding alternative growth opportunities.

Limited Legal Options: If you want to operate legally in Texas, you’ll be restricted to state-approved gaming like the lottery or charitable gaming.
No Online Casinos: You cannot legally run an online casino in Texas. If your business model relies on online gaming, you’ll need to focus on other states.
Sports Betting Uncertainty: The sports betting industry is growing across the U.S., but Texas hasn’t joined yet. If you’re planning a sportsbook, keep an eye on legislative changes.
Expanding Elsewhere: Many states, including New Jersey, Michigan, and Pennsylvania, have fully legalized online casinos and sports betting. These states might be better markets for your platform.

Summing Up

The gambling landscape in Texas is starting to change. There’s growing support for casinos and sports betting, and lawmakers are introducing new bills. But for now, strict laws are still in place. If you’re in the gaming industry, staying informed and flexible will be key to making the most of future opportunities.

As the industry continues to evolve, it’s important to keep up with legislative changes and know where you can legally operate. When Texas opens its doors to online gaming or casinos, you’ll want to be ready.

At Source Code Lab, we specialize in building platforms for online casinos and sports betting operations. If you’re looking to grow your gaming business or expand into new markets, we can help. Contact us today to learn how we can support your next move.