H.B. No. 3980 introduces a regulatory framework for fantasy contests in Texas by adding Chapter 2053 to the Occupations Code. The bill defines key terms related to fantasy contests and clarifies that these contests do not fall under the definition of gambling in Texas law. It requires operators to obtain a license from the Texas Lottery Commission, which will oversee compliance with standards aimed at preventing fraud, abuse, and money laundering, as well as enforcing age restrictions and identity verification. The application process for obtaining a license includes submitting personal and business information, criminal history records, and fingerprints, with specific provisions for those who have recently undergone background checks.

The legislation also establishes a fee structure based on the operator's adjusted gross fantasy contest receipts, with a minimum initial fee of $5,000. It outlines the process for license issuance and renewal, including independent audits and compliance checks, and introduces responsible gaming measures such as a self-exclusion list. Penalties for violations are capped at $5,000 per day, with considerations for the severity of the violation and the operator's history. Additionally, the bill expands the Texas Lottery Commission's authority to access criminal history records and mandates the adoption of rules to implement the new chapter by February 1, 2026, while providing a temporary tax exemption for operators until July 1, 2026. The bill is set to take effect on September 1, 2025.

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