09/29/2014 11:02AM

Court upholds Texas ban on Internet, phone wagering

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A federal court of appeals has affirmed a lower court’s ruling that Texas can prohibit companies like Churchill Downs Inc. from taking wagers from state residents over the Internet and phone.

The U.S. Fifth Circuit Court of Appeals ruled Sept. 24 that a Texas law banning Internet and phone wagering did not violate the Constitution’s protections on interstate commerce, while acknowledging that case law on potential violations of the commerce clause are “quite simply, a mess.” A district court in Texas had previously ruled against Churchill in the matter.

Churchill challenged the Texas law two years ago in the hopes of continuing to take bets from the state’s residents through its market-leading account-wagering operation, twinspires.com. Churchill had argued that the law banning Internet and telephone wagers treated “bricks-and-mortar” sites differently from online operations. While betting over the Internet is banned in Texas, offtrack betting is legal, though in a limited scope.

The court of appeals ruling said that Churchill had failed to demonstrate that Texas law amounted to discrimination.

“Plaintiffs have the burden of showing discriminatory effects, not merely illustrating that discriminatory effects plausibly exist,” the three-judge court ruled.

Following the original ruling in September 2013, Churchill closed off twinspires.com to Texas bettors.

Courtney Norris, a spokeswoman for Churchill Downs, said the company will “continue the appeals process, but we have not finalized our decision.”

The court ruled that Churchill must pay the costs for the state of Texas to defend itself.