Can the Texas Racing Commission limit how many horse racing track licenses it hands out, or issue a track license without wagering rights?

Texas AG Opinion JM-971: What the Racing Commission Can and Cannot Do

Plain-English summary

Texas had recently legalized pari-mutuel wagering on horse racing, and the new Texas Racing Commission was setting up shop. Before it started issuing track licenses, it wanted to know how much control it had over the shape of the industry. Could it decide, for example, to issue only so many licenses, or to license a track but withhold betting privileges, or to license tracks that would run races without any betting at all? The Comptroller sent three of these questions to the Attorney General, and the answer to all three was no.

The Attorney General started with a bedrock principle of Texas administrative law: a state agency is a creature of the statute that created it. It has only the powers the Legislature gave it, either in so many words or by necessary implication, and it cannot stretch its express powers to grab authority the Legislature did not hand over. With that frame, each question had a fairly clean answer.

First, could the Commission cap the number of class 2 and class 3 horse racing licenses? The Racing Act sorts horse tracks into three classes. The Attorney General noticed something telling: the Legislature did put hard numerical caps in the statute, but only in specific places. No more than four class 1 tracks, and no more than three greyhound tracks. It said nothing about limiting class 2 or class 3 horse tracks. When a legislature bothers to write numerical limits in some spots and leaves them out in others, courts read the silence as deliberate. So there is no implied cap on class 2 or class 3 licenses, and the Commission cannot invent one. The Commission had pointed to its general power to refuse a license that would not be "in the public interest" or that a background check showed to be detrimental, but the Attorney General explained those powers are about judging individual applicants one at a time, not about setting an industry-wide ceiling.

Second, could the Commission grant a class 2 or class 3 license but withhold pari-mutuel wagering, in a place where voters had actually approved betting? No. The Attorney General pointed to the statute's own definitions. A "racetrack" is defined as a facility licensed for pari-mutuel wagering, and an "association" is a person licensed to conduct a race meeting with pari-mutuel wagering. So when the statute talks about licensing an association to run a class 2 or class 3 racetrack, it is by definition talking about a license that carries betting privileges. The Commission cannot hand out that license and then strip out the betting; the two come together.

Third, could the Commission create a brand-new license category for tracks that hold races without any betting? Again no. A license, the Attorney General explained, is permission to do something that would otherwise be illegal. But running a horse race without pari-mutuel wagering is not illegal under the Racing Act, and the Act does not say the Commission can require those operators to get a license. It is true that a separate provision (article 179e-4) extends the Commission's power to regulate all horse and greyhound racing, whether or not betting is involved. But regulating an activity and requiring a license to do it are two different powers. The power to regulate does not automatically include the power to license unless the Legislature grants it, and here it did not.

Currency note

This opinion was issued in 1988. 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 (article 179e, V.T.C.S.) has been amended many times since 1988, and the racetrack classifications, license caps, and Racing Commission powers have changed. The Act has also since been recodified in part into the Occupations Code. Anyone dealing with racetrack licensing or Racing Commission authority today should consult the current statute and Commission rules rather than the 1988 article and section numbers used here.

Who this opinion affected (as of 1988)

The Texas Racing Commission: The opinion set limits on its power, telling it that it could not cap class 2 or class 3 licenses, condition licenses to remove wagering, or create a non-wagering license category.

Racetrack operators and applicants: The opinion protected their statutory entitlements, confirming that a class 2 or class 3 license carries wagering privileges and that the number of such licenses is not artificially capped.

Counties and voters: The opinion reinforced that where voters approved pari-mutuel wagering at local option, the Commission could not license a track in that jurisdiction while denying the wagering the voters authorized.

Common questions

Can the Racing Commission limit how many horse track licenses it issues?
Only where the Legislature set a cap. In this opinion the Attorney General concluded the Commission cannot cap class 2 or class 3 licenses, because the statute caps only class 1 tracks (four) and greyhound tracks (three).

Can the Commission grant a track license without betting rights?
No. A licensed racetrack is defined as one authorized to conduct pari-mutuel wagering, so the Commission cannot issue a class 2 or class 3 license that denies the holder wagering privileges.

Can the Commission license non-wagering racetracks?
No. Running a race without pari-mutuel wagering is not unlawful under the Racing Act, and the power to regulate an activity does not include the power to require a license for it unless the Legislature provides one.

Why does the source of an agency's power matter so much here?
Because a Texas agency has only the authority its statute grants, expressly or by necessary implication. It cannot expand its own powers, so each of the Commission's proposed actions had to trace back to a specific statutory grant, and none did.

Background and statutory framework

An administrative agency is a creature of statute and has no inherent authority (Sexton v. Mount Olivet Cemetery Association, 720 S.W.2d 129 (Tex. App. - Austin 1986, writ ref'd n.r.e.)). It may exercise only those powers granted by statute together with those necessarily implied from such authority (City of Sherman v. Public Utility Commission of Texas, 643 S.W.2d 681 (Tex. 1983); Attorney General Opinion JM-903 (1988)), and it may not improvise on its express powers to confer on itself a power the Legislature has not granted (Sexton, supra). The power to grant, refuse, revoke, or cancel occupational licenses is subject to these limits (Stauffer v. City of San Antonio, 344 S.W.2d 158 (Tex. 1961)).

The Texas Racing Act (V.T.C.S. articles 179e through 179e-4) classifies horse racing tracks as class 1, class 2, and class 3 (article 179e, section 6.02). Section 6.02(b) provides that not more than four class 1 racetracks may be licensed and operated in the state, and sections 6.04(d) and 6.14(b) provide that the commission shall not issue licenses for more than three greyhound racetracks. On the first question, those express caps show that when the Legislature intends numerical limits on racetrack licenses, it does so expressly; the statute must therefore be construed as containing no implied numerical limits on class 2 and class 3 licenses (Attorney General Opinion JM-206 (1984)). The Commission's discretionary provisions, which let it issue a license only if the meetings would be "in the public interest" (section 6.04(a)), refuse a license on reasonable grounds after notice and hearing (section 6.06(a)), and refuse a license based on background checks (article 179e-3), are addressed to the denial of individual applications on a case-by-case basis and give no authority to set class-wide numerical limits. The Commission therefore has no authority to cap the number of class 2 or class 3 licenses.

On the second question, section 3.02 directs the commission to regulate and supervise every race meeting involving wagering. Section 1.03(25) defines "racetrack" as a facility licensed under the Act for the conduct of pari-mutuel wagering on greyhound or horse racing, and section 1.03(2) defines an "association" as a person licensed to conduct a race meeting with pari-mutuel wagering. Thus, when sections 6.02(c) and (d) speak of associations licensed to conduct horse races on class 2 or class 3 racetracks, those licensees are by definition authorized to conduct races with pari-mutuel wagering (see also sections 6.01, 6.08, 11.01, and 16.01(a), the last barring issuance of a racetrack license until voters have approved pari-mutuel wagering at a local-option election). The commission may not issue class 2 or class 3 licenses that deny the holders the privilege of conducting races with pari-mutuel wagering (Bexar County Bail Bond Board v. Deckard, 604 S.W.2d 214 (Tex. Civ. App. - San Antonio 1980, no writ)).

On the third question, "licensing" is the issuance of a permit confirming the licensee's right to do what would otherwise be unlawful (Lipsey v. Texas Department of Health, 727 S.W.2d 61 (Tex. App. - Austin 1987, writ ref'd n.r.e.)). The Racing Act does not make it unlawful to conduct horse races without pari-mutuel wagering, and it does not expressly grant the commission power to require such persons to obtain a license. Article 179e-4 provides that, any provision to the contrary notwithstanding, the commission shall regulate all aspects of greyhound and horse racing in the state, whether or not that racing involves pari-mutuel wagering. That provision extends the commission's regulatory power to non-wagering racing, but the power to regulate a business does not embrace the power to require licenses from persons subject to regulation unless the Legislature so provides (State Board of Morticians v. Cortez, 333 S.W.2d 839 (Tex. 1960)). The third question is therefore answered in the negative.

Citations

Statutory authority:

• Texas Racing Act, V.T.C.S. articles 179e through 179e-4
• Article 179e, section 6.02, V.T.C.S. (racetrack classifications; four class 1 tracks maximum)
• Article 179e, sections 6.04 and 6.06, V.T.C.S. (issuance and refusal of licenses; three greyhound tracks maximum)
• Article 179e, section 3.02, V.T.C.S. (scope of commission's regulatory power)
• Article 179e, section 1.03, V.T.C.S. (definitions of "racetrack" and "association")
• Article 179e, section 16.01, V.T.C.S. (local-option election prerequisite)
• Article 179e-3, V.T.C.S. (background checks)
• Article 179e-4, V.T.C.S. (regulation of racing with or without wagering)

Cases:

• Sexton v. Mount Olivet Cemetery Association, 720 S.W.2d 129 (Tex. App. - Austin 1986, writ ref'd n.r.e.)
• City of Sherman v. Public Utility Commission of Texas, 643 S.W.2d 681 (Tex. 1983)
• Stauffer v. City of San Antonio, 344 S.W.2d 158 (Tex. 1961)
• Bexar County Bail Bond Board v. Deckard, 604 S.W.2d 214 (Tex. Civ. App. - San Antonio 1980, no writ)
• Lipsey v. Texas Department of Health, 727 S.W.2d 61 (Tex. App. - Austin 1987, writ ref'd n.r.e.)
• State Board of Morticians v. Cortez, 333 S.W.2d 839 (Tex. 1960)

Prior Attorney General opinions referenced: JM-206 (1984), JM-903 (1988).

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-971
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1988/jm0971.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor OCR errors may remain; the linked PDF is authoritative.

October 24, 1988

Honorable Bob Bullock
Comptroller of Public Accounts
L.B.J. State Office Building
Austin, Texas 78774

Opinion No. JM-971

Re: Authority of the Racing Commission regarding the classification of a racing facility (RQ-1567)

Dear Mr. Bullock:

You ask three questions concerning the authority of the Texas Racing Commission to license horse racing tracks in Texas. The Texas Racing Act, V.T.C.S. articles 179e through 179e-4, creates three classifications for horse racing tracks, class 1, class 2, and class 3. V.T.C.S. art. 179e, section 6.02. You advise us that the commission is considering proposals to limit the number of class 2 and class 3 licenses it will issue, to deny pari-mutuel wagering privileges to certain class 2 or class 3 racetracks, and to create a licensing category for horse racing tracks without wagering privileges. You ask whether the commission has the authority to take such actions.

We begin by reviewing several established principles concerning the power of administrative agencies. An administrative agency is a creature of statute and has no inherent authority. Sexton v. Mount Olivet Cemetery Association, 720 S.W.2d 129 (Tex. App. - Austin 1986, writ ref'd n.r.e.). It may exercise only those powers granted by statute together with those necessarily implied from such statutory authority. See City of Sherman v. Public Utility Commission of Texas, 643 S.W.2d 681 (Tex. 1983); Attorney General Opinion JM-903 (1988). An agency may not improvise upon its express powers so as to confer upon itself indirectly a power the legislature has not granted it expressly or by implication. Sexton v. Mount Olivet Cemetery Association, supra. The power to grant, refuse, revoke, or cancel licenses regulating businesses and occupations is subject to these limitations. See Stauffer v. City of San Antonio, 344 S.W.2d 158 (Tex. 1961).

Your first question is whether the commission may place a numerical limit on the number of horse racing licenses issued for class 2 and class 3 tracks. Section 6.02 of article 179e provides:

(a) Horse-racing tracks are classified as class 1 racetracks, class 2 racetracks, and class 3 racetracks.

(b) A class 1 racetrack is a racetrack on which racing is conducted for a minimum of 45 days in a calendar year, the number of days and the actual dates to be determined by the commission under Article 8 of this Act. A class 1 racetrack may operate only in a county with a population of not less than 750,000, according to the most recent federal census, or in a county adjacent to a county with such a population. Not more than four class 1 racetracks may be licensed and operated in this state.

(c) A class 2 racetrack is a racetrack on which racing is conducted for a number of days not to exceed 44 days in a calendar year except as otherwise provided by this section. . . . The commission may permit an association that holds a class 2 racetrack license and that is located in a national historic district to conduct horse races for more than 44 days in a calendar year.

(d) A class 3 racetrack is a racetrack operated by a county or a nonprofit fair under Article 12 of this Act. An association that holds a class 3 racetrack license and that conducted horse races in 1986 may conduct races for a number of days not to exceed 16 days in a calendar year on the dates selected by the association. (Emphasis added.)

Sections 6.04(d) and 6.14(b) both provide that the commission shall not issue licenses for more than three greyhound racetracks in the state.

Those provisions make clear that when the legislature intends to place numerical limitations on the issuance of racetrack licenses, it does so expressly. Therefore, the statute must be construed as containing no implied numerical limitations on class 2 and class 3 racetrack licenses. See Attorney General Opinion JM-206 (1984).

The racing commission argues, however, that various provisions of the Texas Racing Act grant the commission the discretion to impose reasonable ceilings on the number of class 2 and class 3 licenses it issues. Section 6.04(a) of the act states in part that the commission "may issue a racetrack license to a qualified person if it finds that the conduct of race meetings at the proposed track and location will be in the public interest." Section 6.06(a) provides in part that the commission may refuse to issue a racetrack license if, after notice and hearing, it has reasonable grounds to believe and finds that, among other things, "the applicant is engaged in activities or practices that the commission finds are detrimental to the best interests of the public and the sport of greyhound racing or horse racing." V.T.C.S. art. 179e, section 6.06(a)(16). Article 179e-3 provides the following:

The appropriate section of the commission shall require a complete personal, financial, and business background check of the applicant for a racetrack license, the partners, stockholders, concessionaires, management personnel, management firms, and creditors and shall refuse to issue or renew a license or approve a concession or management contract if, in the sole discretion of that section of the commission, the background checks reveal anything which might be detrimental to the public interest or the racing industry.

Those provisions, however, are addressed to the denial of individual applications, which must be done on a case-by-case basis. They give the commission no authority to set numerical limits on the number of licenses issued for a particular class of racetrack. Accordingly, we conclude that the Texas Racing Commission has no authority to place limits on the number of class 2 or class 3 racetrack licenses it will issue.

You next ask whether the commission may grant a class 2 or class 3 racetrack license but deny pari-mutuel wagering privileges to an association operating a racetrack in a jurisdiction where the voters have approved pari-mutuel wagering on horse racing by local option election. We conclude that the commission has no such authority.

Section 3.02 of the Texas Racing Act describes the scope of the commission's power to regulate horse and greyhound racing under the act:

In accordance with Section 3.01 of this Act, the commission shall regulate and supervise every race meeting involving wagering on the result of greyhound or horse racing. All persons and things relating to the operation of those meetings are subject to regulation and supervision. The commission shall adopt rules for conducting racing involving wagering and shall adopt other rules to administer this Act that are consistent with this Act.

V.T.C.S. art. 179e, section 3.02. Section 1.03(25) defines "racetrack" to mean "a facility that is licensed under this Act for the conduct of pari-mutuel wagering on greyhound racing or horse racing." An "association" is "a person licensed under this Act to conduct a horse race meeting or a greyhound race meeting with pari-mutuel wagering." Id. section 1.03(2). Thus, when subsections (c) and (d) of section 6.02 speak of "associations" licensed to conduct horse races on class 2 or class 3 "racetracks," such licensees are by definition authorized to conduct horse races with pari-mutuel wagering privileges. See also id. sections 6.01 (a person may not conduct race meetings with wagering on the results without a racetrack license); 6.08 (a horse racing association shall make certain deductions from each pari-mutuel pool); 11.01 (pari-mutuel wagering may be conducted only by an association within its enclosure); 16.01(a) (commission shall not issue racetrack license until voters have approved legalization of pari-mutuel wagering on horse or greyhound races in the county at local option election). The commission therefore may not issue class 2 or class 3 racetrack licenses that deny the holders of those licenses the privilege of conducting races with pari-mutuel wagering on the outcome of the races. Bexar County Bail Bond Board v. Deckard, 604 S.W.2d 214 (Tex. Civ. App. - San Antonio 1980, no writ).

Your third question is whether the commission may create a new licensing category for racetracks without pari-mutuel privileges. "Licensing" is the issuance of a permit confirming the licensee's right to do that which would otherwise be unlawful. Lipsey v. Texas Department of Health, 727 S.W.2d 61 (Tex. App. - Austin 1987, writ ref'd n.r.e.). The Texas Racing Act does not make it unlawful for persons to conduct horse races without pari-mutuel wagering on the results, and it is readily acknowledged that the act does not expressly grant the commission the power to require such persons to obtain a license from the commission. However, it is suggested that V.T.C.S. article 179e-4 implicitly supplies such authority:

Any provision in this Act to the contrary notwithstanding, the Texas Racing Commission shall regulate all aspects of greyhound racing and horse racing in this state, whether or not that racing involves pari-mutuel wagering.

This provision plainly extends the commission's power to regulate horse racing to include racetracks on which races are conducted without pari-mutuel wagering. The power to regulate a business, however, does not embrace the power to require licenses from persons subject to regulation unless the legislature so provides. State Board of Morticians v. Cortez, 333 S.W.2d 839 (Tex. 1960). Your third question, therefore, is answered in the negative.

SUMMARY

The Texas Racing Commission is not authorized to set arbitrary limits on the number of class 2 or class 3 racetrack licenses that may be issued in this state. The commission is not authorized to grant a class 2 racetrack license with the condition that the license holder shall not conduct horse races with pari-mutuel wagering on the results. The commission is not authorized to license racetracks that do not conduct horse races with pari-mutuel wagering on the results of the races.

JIM MATTOX
Attorney General of Texas

MARY KELLER
First Assistant Attorney General

LOU MCCREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Steve Aragon
Assistant Attorney General