Who controls the breakage money from greyhound racing bets in Texas?

Plain-English summary

When people bet at a pari-mutuel track, the payout on each dollar is rounded down to a multiple of ten cents. Those leftover odd cents, added up across all the betting, are called "breakage," and they amount to real money. The Texas Racing Act split greyhound breakage in half: 50 percent went to the state, and the other 50 percent went to support the greyhound breeding industry. The Texas Racing Commission asked the Attorney General to sort out who actually handles that second 50 percent, how much of it goes to stakes races, and who gets to write the rules for spending it.

The statute was a tangle. A 1991 floor amendment had bolted new language onto section 6.09(d) saying the money was "to be paid to the commission for the use by the state greyhound breed registry, subject to rules promulgated by the commission," and the same session added sections 10.04 and 10.05, which named the Texas Greyhound Association (the state's only greyhound breed registry) and said it "shall adopt rules" for the breakage and that tracks must pay it "at least every 30 days." Read literally, the pieces pointed in different directions: one said pay the commission, another said pay the Association.

The Attorney General gave the commission the controlling role. First, all of the section 6.09(d) breakage is paid to the commission first, and only then flows to the Association, so nothing is lost by routing it through the commission. Second, 25 percent of the breakage (half of the section 6.09(d) share) is dedicated to stakes races, and the Association's rules for using the money, both the stakes-race portion and the rest, are subject to the commission's approval under section 10.04. The opinion leaned on the legislative history: the amendment that added this language came out of a Senate floor fight over a parallel horse-racing provision, and its sponsors said it was meant to make the commission, not the private registries, the final rule-maker over breakage.

One piece would not fit. Section 10.05 also said the tracks must pay the breakage straight to the Association every 30 days, which clashed with paying the commission first. Because section 6.09(d) was amended later in the legislative process and the history pointed toward commission control, the Attorney General concluded that the conflicting 30-day payment line in section 10.05 was ineffective. The opinion added a constitutional reason for reading the act this way: if the Association, a private group, could set binding rules without commission approval, the statute would risk being an unconstitutional delegation of legislative power to a private entity, so the reading that kept the commission in charge was also the reading that kept the statute valid.

Currency note

This opinion was issued in 1993. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. The Texas Racing Act (then V.T.C.S. article 179e) has been amended and recodified since 1993, so confirm the current allocation and rule-making provisions before relying on anything described here.

Background and statutory framework

The Texas Racing Act authorizes the Texas Racing Commission to regulate pari-mutuel wagering in Texas. See V.T.C.S. article 179e, § 3.02. The Executive Secretary of the commission asked about its authority under sections 6.09(d) and 10.05 to receive and regulate the use of breakage from pari-mutuel wagering on greyhound races. "Breakage" is the odd cents by which the amount payable on each dollar wagered exceeds a multiple of ten cents, except that in a minus pool the breakage is in multiples of five cents. Id. § 1.03(20).

The allocation. Section 6.09(c) provides that 50 percent of the breakage from greyhound wagering is due the state and paid to the commission. Section 6.09(d) allocates the remaining 50 percent to the appropriate state greyhound breeding registry, dedicating 25 percent of the breakage to stakes races and (in language added in 1991) directing money to be paid "to the commission for the use by the state greyhound breed registry, subject to rules promulgated by the commission." The Texas Greyhound Association (TGA) is the only greyhound breed registry in Texas. The commission asked what part of the 50 percent is paid first to the TGA, what part is used for stakes races, and what part is subject to commission rules. The AG concluded that all of the section 6.09(d) breakage is paid first to the commission rather than directly to the TGA, and that one-half of the section 6.09(d) allocation (25 percent of the breakage) is for stakes races, with the TGA's use of both the stakes-race 25 percent and the remaining 25 percent subject to commission rules.

The 1991 amendments and their history. The Legislature added the italicized language of section 6.09(d) in 1991. Acts 1991, 72d Leg., ch. 386, § 30, at 1456. The Senate added it during the third reading of House Bill 2263 on May 18, 1991, as floor amendment 16, and earlier that day added sections 10.04 and 10.05 as floor amendment 3. Section 10.04 directs the state greyhound breed registry to make reasonable rules establishing the qualifications of accredited Texas-bred greyhounds, and provides that rules adopted by the registry are subject to commission approval. Section 10.05 designates the TGA as the official state greyhound breed registry, provides that the registry shall adopt rules for the use of breakage received under section 6.09(d), and states that an association shall pay the breakage due the breed registry at least every 30 days. The "association" in that last sentence is the entity licensed to conduct races (a racetrack), not the TGA. V.T.C.S. article 179e, § 1.03(2).

The interpretive problem. As worded, section 6.09(d) was open to two readings. The commission read it to put the entire 50 percent under stakes-race dedication or commission regulation, with 25 percent for stakes races and 25 percent used by the TGA under commission rules. The alternative read only half of the 50 percent (25 percent of the breakage) as regulated, leaving the TGA the remaining 25 percent free of statutory or regulatory control, an outcome inconsistent with the act's stated purpose of promoting the greyhound breeding industry. See id. § 1.02. The text carried further ambiguities: whether "subject to rules promulgated by the commission" reached both percentages, and an apparent conflict between paying the commission and the section 10.05 requirement that tracks pay the TGA every 30 days.

How the AG resolved it. Texas courts read ambiguous statutes to carry out legislative intent even against a strict grammatical reading. See Green v. State, 773 S.W.2d 816, 818 (Tex. App.-San Antonio 1989, no writ). The legislative history of floor amendment 16 was decisive: the amendment grew out of Senator John Leedom's filibuster against House Bill 2263, during which he sought language for the parallel horse-racing provision in section 6.08(i) that would both route breakage through the commission first and let the commission regulate the registries' use of it. Floor amendment 16 added essentially identical language to section 6.08(i) and section 6.09(d), and a co-sponsor, Senator Chet Brooks, explained that it made the same breakage limitations apply to horse racing and dog racing. From this the AG concluded the Legislature meant to authorize the commission to adopt rules over all section 6.09(d) breakage (including the stakes-race share) and to require that all of it be paid to the commission first. That construction harmonizes with the first sentence of section 6.09(d) (the money still ends up with the registry) and with section 10.04's provision that registry rules are "subject to commission approval," which the AG read to cover the TGA's breakage rules, not just its greyhound-qualification rules. The AG could not harmonize the section 10.05 requirement that tracks pay the TGA every 30 days, and, because section 6.09(d) was amended later in the process, concluded that conflicting payment requirement in section 10.05 was ineffective.

The constitutional backstop. State regulatory statutes must be sufficiently clear, and article III, section 1 of the Texas Constitution bars the Legislature from delegating legislative power "to the uncontrolled discretion of a private individual or entity." See Attorney General Opinion JM-509 (1986). Statutes with adequate controls do not offend that rule. Compare Minton v. City of Fort Worth Planning Commission, 786 S.W.2d 563 (Tex. App.-Fort Worth 1990, no writ), with Dudding v. Automatic Gas Co., 193 S.W.2d 517 (Tex. 1946). So while the Legislature or a state agency may seek private parties' help in drafting rules, it must adopt and approve the final rules enforced against the public. Reading sections 10.04 and 10.05 together to subject the TGA's breakage rules to commission approval kept the act consistent with that principle and with general due process limits on the police power, the kind applied in Williams v. State, 176 S.W.2d 177, 182 (Tex. Crim. App. 1943), Texas State Teachers Ass'n v. State, 711 S.W.2d 421, 425 (Tex. App.-Austin 1986, writ ref'd n.r.e.), Brown v. Humble Oil & Refining Co., 83 S.W.2d 935, 943 (Tex. 1935), Lone Star Gas Co. v. Kelly, 165 S.W.2d 446, 449 (Tex. 1942), and Texas Pharmaceutical Ass'n v. Dooley, 90 S.W.2d 328 (Tex. Civ. App.-Austin 1936, writ dism'd) (invalidating a statute that diverted state-collected license fees to a private association).

Common questions

What is "breakage" at a Texas dog track?
It is the leftover odd cents when a pari-mutuel payout is rounded down to the nearest ten cents (five cents in a minus pool). Across all the wagering, those fractions add up to a meaningful pool of money that the Racing Act divides up.

Did the breakage go straight to the greyhound breeders' group?
No. The opinion concluded that all of the section 6.09(d) breakage is paid first to the Texas Racing Commission, which then routes it to the Texas Greyhound Association. Nothing is lost by the detour, but the commission handles it first.

Who set the rules for spending the breakage?
The Texas Greyhound Association could propose rules, but under section 10.04 those rules were subject to the commission's approval. The opinion read the act so that the commission, a public body, had the final say rather than the private association.

Why did the opinion treat the 30-day payment rule in section 10.05 as ineffective?
Because it conflicted with the later-amended section 6.09(d) requirement that breakage be paid to the commission first. The opinion resolved the conflict in favor of the provision the Legislature added later in the process and the one that avoided a constitutional delegation problem.

Citations

• V.T.C.S. article 179e (Texas Racing Act): § 1.02 (purpose), § 1.03(2) ("association"), § 1.03(20) ("breakage"), § 3.02 (commission regulates pari-mutuel wagering), § 6.09(c) (50% of greyhound breakage to the state), § 6.09(d) (remaining 50%; stakes races; pay commission subject to rules), § 10.04 (registry rules subject to commission approval), § 10.05 (TGA designated; adopts breakage rules; 30-day track payment)
• Tex. Const. art. I, § 1; art. III, § 1 (limits on delegating legislative power to private entities)
• Attorney General Opinion JM-509 (1986)
• Green v. State, 773 S.W.2d 816 (Tex. App.-San Antonio 1989, no writ)
• Minton v. City of Fort Worth Planning Commission, 786 S.W.2d 563 (Tex. App.-Fort Worth 1990, no writ)
• Dudding v. Automatic Gas Co., 193 S.W.2d 517 (Tex. 1946)
• Williams v. State, 176 S.W.2d 177 (Tex. Crim. App. 1943)
• Texas State Teachers Ass'n v. State, 711 S.W.2d 421 (Tex. App.-Austin 1986, writ ref'd n.r.e.)
• Brown v. Humble Oil & Refining Co., 83 S.W.2d 935 (Tex. 1935)
• Lone Star Gas Co. v. Kelly, 165 S.W.2d 446 (Tex. 1942)
• Texas Pharmaceutical Ass'n v. Dooley, 90 S.W.2d 328 (Tex. Civ. App.-Austin 1936, writ dism'd)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/dan-morales/dm-0211
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1993/dm0211.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, and a few badly garbled passages (including part of the quoted text of section 6.09(d) and several footnotes) were reconstructed from context or left marked; garbled case names were verified against the official reporters. One passage on page 8 is cut off in the source scan and is marked [. . .]. The linked PDF is authoritative.

Office of the Attorney General
State of Texas

DAN MORALES
ATTORNEY GENERAL

March 29, 1993

Mr. David J. Freeman
Executive Secretary
Texas Racing Commission
P.O. Box 12080
Austin, Texas 78711-2080

Opinion No. DM-211

Re: Authority of the Texas Racing Commission pursuant to sections 6.09 and 10.05 of the Texas Racing Act, article 179e, V.T.C.S., to receive and regulate the use of breakage generated by pari-mutuel wagering on greyhounds (RQ-230)

Dear Mr. Freeman:

The Texas Racing Act (the "act") authorizes the Texas Racing Commission (the "commission") to regulate pari-mutuel wagering in the state of Texas. See, e.g., V.T.C.S. art. 179e, § 3.02. Your questions concern the authority of the commission under sections 6.09(d) and 10.05 of the act to receive and regulate the use of breakage generated by pari-mutuel wagering on greyhound races in Texas. "Breakage" means:

the odd cents by which the amount payable on each dollar wagered exceeds a multiple of 10 cents, except in the event a minus pool occurs, in which case the breakage shall be in multiples of five cents.

Id. § 1.03(20).

Section 6.09(c) provides that 50 percent of the breakage generated by pari-mutuel wagering on greyhound races is due the state and paid to the commission, while section 6.09(d) of the act allocates the remaining 50 percent. Section 6.09(d) provides:

Fifty percent of the breakage is to be paid to the appropriate state greyhound breeding registry. Of that portion of the breakage 25 percent of that breakage is to be used in stakes races and 25 percent of that breakage . . . is to be paid to the commission for the use by the state greyhound breed registry, subject to rules promulgated by the commission. [Emphasis and footnote added.]

We understand you to ask what part of that 50 percent is to be paid first to the Texas Greyhound Association (the "TGA"), the only breed registry for greyhounds in Texas. We understand you also to ask what part of that breakage is to be used for stakes races and what part is subject to rules adopted by the commission. We conclude that all of the breakage allocated by section 6.09(d) is to be paid first to the commission rather than to the TGA. We also conclude that one-half of the breakage allocated by section 6.09(d), or 25 percent, is to be used for stakes races and that the TGA's use of the 25 percent set aside for stakes races as well as its use of the remaining 25 percent is subject to rules adopted by the commission.

In 1991, the legislature added the language of section 6.09(d) italicized above. Acts 1991, 72d Leg., ch. 386, § 30, at 1456. Specifically, the senate added the italicized language during the third reading of House Bill 2263 on May 18, 1991. S.J. of Tex., 72d Leg., at 1717-18 (May 18, 1991) (floor amendment 16). Earlier that day, the senate added sections 10.04 and 10.05 to the act during the second reading of the bill. Id. at 1703 (floor amendment 3). Those sections provide:

Section 10.04. The state greyhound breed registry shall make reasonable rules to establish the qualifications of accredited Texas-bred greyhounds to promote, develop, and improve the breeding of greyhounds in this state. Rules adopted by the registry are subject to commission approval.

Section 10.05. The officially designated state greyhound breed registry for accredited Texas-bred greyhounds is the Texas Greyhound Association. The state breed registry shall adopt rules to provide for the use of breakage received by it under Section 6.09(d) of this Act. An association shall pay the breakage due the breed registry to the appropriate state greyhound registry at least every 30 days.

V.T.C.S. art. 179e, §§ 10.04-.05; Acts 1991, 72d Leg., ch. 386, § 48, at 1460. The reference to "association" in the last sentence in section 10.05 is not to the TGA, but to the individual or entity licensed to conduct races, i.e., a racetrack. V.T.C.S. art. 179e, § 1.03(2) (defining "association" as person licensed to conduct race meetings with pari-mutuel wagering).

You note in your request letter that section 6.09(d) as currently worded is subject to differing interpretations. You explain that the commission interprets the section as setting aside for stakes races or subjecting to commission regulation the entire 50 percent of the breakage allocated by section 6.09(d), with one-half of that amount or 25 percent to be used in stakes races and the other one-half or 25 percent to be used by the TGA in accordance with commission rules. You further explain, however, that the section could be read to set aside for stakes races or subject to commission regulation only one-half of the 50 percent of the breakage, or 25 percent, with 12 1/2 percent set aside for use in stakes races and 12 1/2 percent to be used by the TGA in accordance with commission rules. Under that interpretation, the TGA would receive the remaining 25 percent free of either statutory or regulatory control. You state, however, that this interpretation would result in the use of breakage inconsistent with the purpose of the act, which includes the promotion of the greyhound breeding industry in Texas. See id. § 1.02 (stating act's purpose).

We note also several other ambiguities in section 6.09(d). First, the phrase "subject to rules promulgated by the commission" could be construed to apply to both percentages mentioned in the second sentence, or to apply to only the latter of the two percentages. Second, the requirement that 25 percent be paid to the commission appears to conflict with the requirement that the 50 percent of the breakage is to be paid to the TGA, the state greyhound breed registry. Furthermore, the requirement in section 6.09(d) that 25 percent be paid to the commission appears to conflict with the requirement in section 10.05 that the greyhound associations pay to the TGA breakage due it at least every 30 days.

The Texas courts state that the primary purpose of statutory construction is to ascertain the intent of the legislature and that ambiguous statutes should be interpreted to accomplish the legislature's intent even if that intent is inconsistent with a strict or grammatical reading of the statute. See Green v. State, 773 S.W.2d 816, 818 (Tex. App.-San Antonio 1989, no writ); 67 Tex. Jur. 3d Statutes §§ 91, 113 (and authorities cited therein). Accordingly, we turn to the legislative history of the phrase "is to be paid to the commission for the use by the state greyhound registry, subject to rules promulgated by the commission."

As mentioned earlier, the senate added that phrase during the third reading of House Bill 2263 on adoption of floor amendment 16. S.J. of Tex., 72d Leg., at 1717-18 (May 18, 1991). Adoption of floor amendment 16 resulted in termination of Senator John Leedom's filibuster on the floor against passage of House Bill 2263. During the filibuster, the senator referred numerous times to section 6.08(i) of the bill, a provision allocating a part of the breakage generated by pari-mutuel wagering on horse races to the horse breed registries, and stated his desire to have language added that would both require breakage allocated to the horse breed registry to be paid first to the commission and authorize the commission to adopt rules regulating the horse breed registries' use of that breakage. See Debate on H.B. 2263 on the Floor of the Senate, 72d Leg. (May 18, 1991) (tape available from Senate Staff Services). Floor amendment 16, co-sponsored by Senator Leedom, added to section 6.08(i) the proviso that the breakage allocated by section 6.08(i) to the horse breed registry was "to be paid to the commission for use by the appropriate state horse breed registry, subject to rules promulgated by the commission." This language is essentially the same as that added by floor amendment 16 to section 6.09(d). Senator Chet Brooks, another co-sponsor of the amendment, in fact explained to the house conferees that floor amendment 16 assured that the same breakage limitations applied to horse racing and dog racing. See Debate on H.B. 2263 on the Floor of the Senate, 72d Leg. (May 18, 1991) (tape available from Senate Staff Services). Given this history, we conclude the legislature intended to authorize the commission to adopt rules regulating the use of the breakage allocated by section 6.09(d), including the percentage set aside for stakes races. Furthermore, we conclude that the legislature intended by the addition of the phrase "is to be paid to the commission for the use by the state greyhound breed registry, subject to rules promulgated by the commission" also to require that all breakage allocated by section 6.09(d) be paid first to the commission.

Our construction of section 6.09(d) can be harmonized with the requirement in the first sentence of section 6.09(d) that 50 percent of the breakage "is to be paid to the [appropriate state greyhound] breeding registry" since even if 50 percent is first paid to the commission, it will be ultimately paid to the registry. This construction can also be harmonized with the statement in section 10.05 that the TGA "shall adopt rules to provide for the use of breakage received by it under Section 6.09(d) of this Act." While this statement by its terms does not provide for commission review and adoption of the TGA's rules, we conclude that the provision in section 10.04 that "[r]ules adopted by the registry [the TGA] are subject to commission approval" applies to the TGA's rules on breakage as well as to its rules establishing qualifications for greyhounds. The section 10.04 provision is not expressly limited to the TGA's rules establishing qualifications for Texas-bred greyhounds, and the senate added it to the act at the same time as the statement in section 10.05. S.J. of Tex., 72d Leg., at 1703 (May 18, 1991). In addition, we found no indication in the legislative history of the floor amendment adding sections 10.04 and 10.05 to the act that the legislature intended the TGA's rules on breakage to take effect without prior commission approval. More importantly, as we explain later in this opinion, no other conclusion would render the section 10.05 statement constitutional.

We are not able, however, to harmonize our construction of section 6.09(d) with the requirement in section 10.05 that the greyhound associations pay to the TGA breakage due it at least every 30 days. As mentioned above, the senate amended section 6.09(d) during the third reading on May 18, 1991, while sections 10.04 and 10.05 were added during the second reading earlier that day. This fact along with the legislative history of floor amendment 16 lead us to conclude that the conflicting payment requirement in section 10.05 is ineffective.

We turn now to the relevant constitutional principles. State regulatory statutes must be sufficiently clear, based on article III, section 1 of the Texas Constitution, which prohibits the legislature from delegating legislative powers "to the uncontrolled discretion of a private individual or entity." See Attorney General Opinion JM-509 (1986) at 3. Statutes with sufficient controls to ensure the accomplishment of public rather than private purposes, however, will not violate these constitutional provisions. Compare Minton v. City of Fort Worth Planning Commission, 786 S.W.2d 563 (Tex. App.-Fort Worth 1990, no writ) (replatting statute invalid because it delegated to a narrow segment of the community legislative power without controls on exercise of power) with Dudding v. Automatic Gas Co., 193 S.W.2d 517 (Tex. 1946) (holding valid a statute that incorporated by reference existing regulations of a private entity, a copy of which was on file with a state agency). Thus, while the legislature or state agencies may request the advice and assistance of private individuals and entities in the drafting of regulatory rules, they must adopt and approve the final rules to be enforced against industry members or other members of the public. Our conclusion that sections 10.04 and 10.05, when read together, subject the TGA's rules on breakage to commission approval is consistent with this general principle, and thus, we need not find that section 10.05 violates article I, section 1 or article III, section 1 of the Texas Constitution.

This conclusion and our conclusion that section 6.09(d) authorizes the commission to adopt final rules for the TGA's use of all breakage it receives under that section are also consistent with general due process principles. Adoption of regulatory statutes such as the Racing Act is within the state's police power to protect the peace, health, or general welfare of the public. Williams v. State, 176 S.W.2d 177, 182 (Tex. Crim. App. 1943); Texas State Teachers Ass'n v. State, 711 S.W.2d 421, 425 (Tex. App.-Austin 1986, writ ref'd n.r.e.). Although a state's police power is broad, it may not exceed the state's duty to protect the welfare of its citizens "as consistently as may be with private property rights." Brown v. Humble Oil & Refining Co., 83 S.W.2d 935, 943 (Tex. 1935). Due process of law thus requires that the state exercise its police power only for public purposes and in a manner that ensures the accomplishment of those public purposes. Id.; Lone Star Gas Co. v. Kelly, 165 S.W.2d 446, 449 (Tex. 1942) (the state's police power may not be exercised so as to result in harm to the public). In Texas Pharmaceutical Ass'n v. Dooley, a Texas court applied these principles and invalidated a statute requiring a state agency to turn over to a private pharmaceutical association part of the licensing fees imposed by the statute on pharmacists. 90 S.W.2d 328 (Tex. Civ. App.-Austin 1936, writ dism'd). The court concluded that the fee transfer provision was an invalid exercise of the state's police power because it connected the private association with [. . .]

SUMMARY

Section 6.09(d) of the Texas Racing Act, V.T.C.S. article 179e, requires all of the breakage allocated by that section, that is, the 50 percent of the breakage generated by pari-mutuel wagering on greyhound races, to be paid first to the Texas Racing Commission. That section also dedicates one-half of the 50 percent, or 25 percent, to stakes races. The Texas Racing Commission is authorized by section 6.09(d) to adopt rules regulating all breakage allocated by section 6.09(d), including the 25 percent set aside for stakes races. However, in accordance with sections 10.04 and 10.05 of the act, the Texas Greyhound Association may propose rules for the use of breakage it receives under the act, but those rules are subject to approval by the Texas Racing Commission.

DAN MORALES
Attorney General of Texas

WILL PRYOR
First Assistant Attorney General

MARY KELLER
Deputy Attorney General for Litigation

RENEA HICKS
State Solicitor

MADELEINE B. JOHNSON
Chair, Opinion Committee

Footnotes (recovered in part from the scan; several footnotes were heavily garbled and are summarized rather than quoted):

A worked example of breakage: a payable amount of, for instance, $2.17 would be rounded down to $2.10, and the odd seven cents would not be paid to the winning bettor but instead handled for the commission through the Comptroller of Public Accounts, in accordance with the act. See V.T.C.S. art. 179e, §§ 6.08(b)-(i), 6.09(c)-(d), 9.04, 10.05; 16 Tex. Admin. Code § 301.1 (defining "minus pool" as a pool with insufficient net pool to pay minimum odds to winning bettors).

See also V.T.C.S. art. 179e, § 3.09(a) (provision for deposit in the state treasury by the commission of money it collects under the act).

A footnote tracing an earlier version of section 6.09(d) language added during the third reading of Senate Bill 15 in the 69th Legislature, Second Called Session, and committee history of that bill could not be fully recovered from the scan.