     Case: 11-50932   Document: 00512713387   Page: 1   Date Filed: 07/28/2014




        IN THE UNITED STATES COURT OF APPEALS
                 FOR THE FIFTH CIRCUIT     United States Court of Appeals
                                                    Fifth Circuit

                                                                       FILED
                                                                     July 28, 2014
                               No. 11-50932
                                                                    Lyle W. Cayce
                                                                         Clerk
DEPARTMENT OF TEXAS, Veterans of Foreign Wars of the United States;
AMVETS DEPARTMENT OF TEXAS, INCORPORATED; AMVETS POST
52, INCORPORATED; AMVETS POST 52, AUXILIARY, INCORPORATED;
THE GREAT COUNCIL OF TEXAS, Improved Order of Redmen; REDMEN
WAR EAGLE TRIBE NO. 17; REDMEN TRIBE NO. 21 GERONIMO;
REDMEN RAMONA COUNCIL NO. 5; THE INSTITUTE FOR DISABILITY
ACCESS, INCORPORATED, doing business as Adapt of Texas; TEMPLE
ELKS LODGE NO. 138, Benevolent and Protective Order of Elks of The
United States of America, Incorporated; BRYAN LODGE NO. 859,
Benevolent and Protective Order of Elks of The United States of America,
Incorporated; AUSTIN LODGE NO. 201, Benevolent and Protective Order of
Elks of The United States of America, Incorporated; ANNA FIRE AND
RESCUE, INCORPORATED,

                                        Plaintiffs-Appellees,
v.

TEXAS LOTTERY COMMISSION; GARY GRIEF, Executive Director in His
Official Capacity; SANDRA K. JOSEPH, Director of Charitable Bingo in Her
Official Capacity; MARY ANN WILLIAMSON, Commissioner in Her Official
Capacity; UNKNOWN COMMISSIONER IN OFFICIAL CAPACITY; J.
WINSTON KRAUSE, Commissioner in His Official Capacity,

                                        Defendants-Appellants.




                Appeal from the United States District Court
                     for the Western District of Texas
     Case: 11-50932      Document: 00512713387         Page: 2    Date Filed: 07/28/2014



                                      No. 11-50932
Before STEWART, Chief Judge, and JOLLY, DAVIS, JONES, SMITH,
DeMOSS, DENNIS, CLEMENT, PRADO, OWEN, ELROD, SOUTHWICK,
HAYNES, GRAVES, and HIGGINSON, Circuit Judges. *

STEWART, Chief Judge, joined by JOLLY, DAVIS, JONES, SMITH,
CLEMENT, PRADO, OWEN, ELROD, SOUTHWICK, HAYNES, and
HIGGINSON:


       The issue presented in this appeal is the constitutionality of political
advocacy restrictions contained in the Texas Bingo Enabling Act (“the Bingo
Act”). The Bingo Act allows charitable organizations to raise money by holding
bingo games on the condition that the money is used only for the organizations’
charitable purpose.          Plaintiffs-Appellees filed suit challenging these
restrictions, arguing they violate their speech rights under the First
Amendment. The district court granted summary judgment in favor of
Appellees and issued a permanent injunction preventing enforcement of the
challenged provisions. The panel majority opinion, which reversed the district
court, was vacated by our decision to rehear this case en banc. Dep’t of Tex.,
Veterans of Foreign Wars of the U.S. v. Tex. Lottery Comm’n, 734 F.3d 1223
(5th Cir. 2013). For the reasons stated below, we now affirm the district court’s
permanent injunction and summary judgment.
                                     I. BACKGROUND
       In Texas, gambling is generally prohibited. Tex. Const. art. III, § 47.
However, in 1980, the Texas Constitution was amended to establish an
exception to this prohibition for charitable bingo. Id. § 47(b). The Texas
legislature implemented this exception through the Bingo Act, which
authorizes qualified nonprofit organizations to host bingo games. Tex. Occ.


       * Judge King, having taking senior status before the rehearing en banc, did not
participate in this decision. Judge Costa did not participate in the en banc rehearing or in
this decision.

                                             2
    Case: 11-50932       Document: 00512713387     Page: 3     Date Filed: 07/28/2014



                                   No. 11-50932
Code Ann. § 2001.001 et seq. The Bingo Act contains the following political
advocacy restrictions:


      A licensed authorized organization may not use the net proceeds
      from bingo directly or indirectly to: (1) support or oppose a
      candidate or slate of candidates for public office; (2) support or
      oppose a measure submitted to a vote of the people; or (3) influence
      or attempt to influence legislation.

Id. § 2001.456.
      Plaintiffs-Appellees are a host of nonprofit organizations (and/or their
parent organizations) licensed to conduct bingo in Texas (“the Charities”). The
lead Plaintiffs are the Department of Texas, Veterans of Foreign Wars (“VFW”)
and the Institute for Disability Access, d/b/a ADAPT of Texas. On June 25,
2010, they brought suit under 42 U.SC. § 1983 against the commissioners and
two executive officers of the Texas Lottery Commission, the state agency
responsible    for    bingo   licensing   and     regulation     (collectively,   “the
Commission”). 1      Specifically, they alleged that the latter two of these
restrictions, Sections 2001.456(2)–(3), violate their right to freedom of speech.
      The First Amendment challenge was twofold: First, the Charities
claimed that subsections two and three of Section 2001.456 are facially
unconstitutional because they are a direct abridgement of speech with no
compelling or substantial justifying interest. Second, they claimed the law
unconstitutionally discriminates between the Charities and similarly situated
businesses, such as racetracks, which are not prohibited from using their
revenue for political purposes.
      In light of the then-upcoming legislative session, the Charities moved for
entry of a preliminary injunction barring enforcement of the political speech


      1 The Texas Lottery Commission was originally a defendant, but it was dismissed
based on sovereign immunity.
                                          3
    Case: 11-50932     Document: 00512713387     Page: 4   Date Filed: 07/28/2014



                                  No. 11-50932
restrictions in Section 2001.456(2)–(3).       The district court granted the
Charities’ request on October 29, 2010 and explained its reasoning in an
extensive opinion. Relying heavily on the Supreme Court’s opinion in Citizens
United v. Federal Election Commission, 558 U.S. 310 (2010), the district court
concluded that the restrictions in Section 2001.456 violate the First
Amendment because they burden political speech and fail to satisfy strict
scrutiny.     The district court also concluded that the restrictions are
unconstitutional conditions because they require that, as a condition of
participating in the state’s charitable bingo program, the Charities not exercise
their right to engage in political speech.
      The Charities moved for summary judgment, which the district court
granted, permanently enjoining the Commission from enforcing the invalid
provisions.   The Commission appealed.       A unanimous panel of this court
originally reversed the district court’s summary judgment in favor of the
Charities and its permanent injunction preventing enforcement of the
challenged statutory provisions. Dep’t of Texas, Veterans of Foreign Wars of
U.S. v. Texas Lottery Comm’n, 698 F.3d 239 (5th Cir. 2012), withdrawn, 727
F.3d 415 (5th Cir. 2013), vacated, 734 F.3d 1223 (5th Cir. 2013). After panel
rehearing, a panel majority issued a revised opinion that again reversed the
district court’s judgment. Texas Lottery Comm’n, 727 F.3d 415, vacated, 734
F.3d 1223. Thereafter, this court granted en banc rehearing. 734 F.3d 1223.
                           II. STANDARD OF REVIEW
      We review a district court’s summary judgment de novo, applying the
same standards as the district court. Ballard v. Devon Energy Prod. Co., 678
F.3d 360, 365 (5th Cir. 2012). Summary judgment should be granted if “there
is no genuine dispute as to any material fact and the movant is entitled to
judgment as a matter of law.’’ Fed. R. Civ. P. 56(a).


                                        4
    Case: 11-50932      Document: 00512713387        Page: 5    Date Filed: 07/28/2014



                                    No. 11-50932
                                    III. DISCUSSION
      The Commission first attacks the Charities’ standing to bring the
underlying suit. The Commission next argues that because the Bingo Act
creates a subsidy the state may constitutionally attach restrictions to funds
earned by a charity through participation in the program. Additionally, the
Commission argues that even if the Bingo Act does not create a subsidy, the
restrictions are permissible under the First Amendment. We address each
argument in turn.
      A. Standing 2
      Constitutional standing is a jurisdictional question that we review de
novo. Nat’l Fed’n of the Blind of Tex., Inc. v. Abbott, 647 F.3d 202, 208 (5th Cir.
2011). To establish Article III standing, a plaintiff must show “an injury-in-
fact caused by a defendant’s challenged conduct that is redressable by a court.”
K.P. v. LeBlanc, 627 F.3d 115, 122 (5th Cir. 2010). For a plaintiff’s claim to be
redressable, it must be “likely, as opposed to merely speculative, that a
favorable decision will redress the plaintiff’s injury.” S. Christian Leadership
Conference v. Supreme Court of State of La., 252 F.3d 781, 788 (5th Cir. 2001).
“[A] plaintiff satisfies the redressability requirement when he shows that a
favorable decision will relieve a discrete injury to himself. He need not show
that a favorable decision will relieve his every injury.” LeBlanc, 627 F.3d at
123 (alteration in original) (quoting Larson v. Valente, 456 U.S. 228, 243 n.15
(1982)).
      The Commission argues that the Charities’ claims are not redressable
because the relief they seek—the ability to use bingo proceeds for political
advocacy—is independently foreclosed by the requirement in the Texas


      2 We agree with the panel majority’s conclusion that the Charities have standing to
sue. See Texas Lottery Comm’n, 727 F.3d at 419–21. Accordingly, we generally adopt the
panel majority’s standing analysis herein. See id.
                                           5
    Case: 11-50932     Document: 00512713387     Page: 6   Date Filed: 07/28/2014



                                  No. 11-50932
Constitution and the Bingo Act that bingo proceeds be used only for an
organization’s charitable purpose. See Tex. Const. art. III, § 47(b)(1); Tex. Occ.
Code Ann. § 2001.454(a). According to the Commission, even if we enjoin
enforcement of the political advocacy restrictions, the charitable purpose
requirement, which the Charities have not challenged, would still prohibit the
Charities from using bingo proceeds for lobbying or to support or oppose ballot
measures.    As support, the Commission argues: (1) that by enacting the
challenged political advocacy restrictions, the legislature made clear that an
organization’s charitable purpose cannot include political activity, and (2) the
Commission’s interpretation of the charitable purpose requirement is
reasonable and entitled to deference.
      The Commission’s standing argument requires that we interpret the
charitable purpose requirement as containing an independent prohibition on
the use of bingo proceeds for political advocacy in addition to the prohibition in
Section 2001.456 challenged by the Charities. While the term “charitable
purpose” is not defined in the Texas Constitution, it is defined in the Bingo Act.
See Owens v. State, 19 S.W.3d 480, 484 (Tex. App.—Amarillo 2000, no pet.)
(“The [Texas] Legislature may define terms which are not defined in the
Constitution itself . . . .”). We interpret Texas statutes the way we believe the
Texas Supreme Court would do so. See United States v. Escalante, 239 F.3d
678, 681 n.12 (5th Cir. 2001); see also Lipscomb v. Columbus Mun. Separate
Sch. Dist., 269 F.3d 494, 508 n.72 (5th Cir. 2001). The Bingo Act defines
“charitable purpose[]” as follows:
      Except as otherwise provided by law, the net proceeds derived from
      bingo and any rental of premises are dedicated to the charitable
      purposes of the organization only if directed to a cause, deed, or
      activity that is consistent with the federal tax exemption the
      organization obtained under 26 U.S.C. Section 501 and under
      which the organization qualifies as a nonprofit organization as
      defined by Section 2001.002. If the organization is not required to
                                        6
    Case: 11-50932     Document: 00512713387     Page: 7   Date Filed: 07/28/2014



                                  No. 11-50932
      obtain a federal tax exemption under 26 U.S.C. Section 501, the
      organization’s net proceeds are dedicated to the charitable
      purposes of the organization only if directed to a cause, deed, or
      activity that is consistent with the purposes and objectives for
      which the organization qualifies as an authorized organization
      under Section 2001.002.

Tex. Occ. Code Ann. § 2001.454(b); see also id. § 2001.002(7).
      A plain reading of the above definition, which is quite broad, does not
support the Commission’s assertion that an organization’s use of bingo
proceeds for political advocacy is inherently inconsistent with the charitable
purpose requirement. Cf. R.R. Comm’n of Tex. v. Tex. Citizens for a Safe Future
& Clean Water, 336 S.W.3d 619, 628 (Tex. 2011) (“We ordinarily construe a
statute so as to give effect to the Legislature’s intent as expressed in its plain
language.”). The definition shows that the requirement is satisfied so long as
bingo proceeds are used for a “cause, deed, or activity that is consistent with”
the purpose for which an organization received its federal tax exemption and
qualified as a charitable organization under state law. Tex. Occ. Code Ann.
§ 2001.454(b) (emphasis added). It is easy to imagine scenarios where a charity
could use political advocacy to advance its charitable purpose in a way that
satisfies this definition. As the Charities point out, the VFW lobbies in support
of property tax exemptions for disabled veterans and for veteran entitlement
programs offered through the Veterans Administration. We see no reason why
these projects violate the charitable purpose requirement as defined above, and
the Commission provides no basis to conclude otherwise.
      Nor is the Commission’s interpretation of the charitable purpose
requirement entitled to deference. The Texas Supreme Court has explained
that it will “generally uphold an agency’s interpretation of a statute it is
charged . . . with enforcing, ‘so long as the construction is reasonable and does
not contradict the plain language of the statute.’” Citizens for a Safe Future &

                                        7
    Case: 11-50932     Document: 00512713387    Page: 8    Date Filed: 07/28/2014



                                 No. 11-50932
Clean Water, 336 S.W.3d at 625 (quoting First Am. Title Ins. Co. v. Combs, 258
S.W.3d 627, 632 (Tex. 2008)). However, that deference is “tempered by several
considerations.” Id.
      It is true that courts give some deference to an agency regulation
      containing a reasonable interpretation of an ambiguous statute.
      But there are several qualifiers in that statement. First, it applies
      to formal opinions adopted after formal proceedings, not isolated
      comments during a hearing or opinions [in a court brief]. Second,
      the language at issue must be ambiguous; an agency’s opinion
      cannot change plain language. Third, the agency’s construction
      must be reasonable; alternative unreasonable constructions do not
      make a policy ambiguous.

Id. (alteration in original) (quoting Fiess v. State Farm Lloyds, 202 S.W.3d 744,
747–48 (Tex. 2006)). The Commission has not pointed to any formal opinion
in which it has interpreted the charitable purpose requirement as establishing
a wholesale prohibition on political advocacy. And while the Bingo Act
certainly defines the term “charitable purpose” very broadly, the definition is
not ambiguous. Accordingly, the Charities have standing to bring their claims.
      B. The Challenged Provisions
      The Commission argues that the Bingo Act’s political advocacy
restrictions do not unconstitutionally burden political speech because they fall
within the government’s power to subsidize some activities to the exclusion of
others.   This conclusion is rooted in the Supreme Court’s jurisprudence
regarding the government’s attachment of conditions to its allocation of public
funds, which, in the case of the federal government, arises from Congress’s
spending power.
            1. The Bingo Act does not create a subsidy.
      The Spending Clause of the U.S. Constitution authorizes Congress “[t]o
lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and
provide for the common Defen[s]e and general Welfare of the United States.”

                                       8
    Case: 11-50932     Document: 00512713387     Page: 9   Date Filed: 07/28/2014



                                  No. 11-50932
U.S. Const. art. I, § 8, cl. 1. “The Clause provides Congress broad discretion to
tax and spend for the ‘general Welfare,’ including by funding particular state
or private programs or activities. That power includes the authority to impose
limits on the use of such funds to ensure they are used in the manner Congress
intends.” Agency for Int’l Dev. v. Alliance for Open Soc’y Int’l, Inc., 133 S. Ct.
2321, 2327–28 (2013) (citation omitted); see also South Dakota v. Dole, 483 U.S.
203, 206 (1987) (“Incident to this [spending] power, Congress may attach
conditions on the receipt of federal funds, and has repeatedly employed the
power ‘to further broad policy objectives by conditioning receipt of federal
moneys upon compliance by the recipient with federal statutory and
administrative directives.’” (citations omitted)). State legislatures likewise
have broad latitude in exercising their spending powers.         See Leathers v.
Medlock, 499 U.S. 439, 451 (1991) (citing to cases recognizing this broad
authority). “As a general matter, if a party objects to a condition on the receipt
of federal funding, its recourse is to decline the funds. This remains true when
the objection is that a condition may affect the recipient’s exercise of its First
Amendment rights.” Alliance for Open Soc’y, 133 S. Ct. at 2328.
      The Commission principally relies on two Supreme Court cases to justify
the provisions as subsidies. See Rust v. Sullivan, 500 U.S. 173 (1991); Regan
v. Taxation with Representation of Wash., 461 U.S. 540 (1983). These cases
hold that the government may attach certain restrictions to direct or indirect
receipt of funds from the public fisc.
      In Taxation with Representation, the Supreme Court held that the
Internal Revenue Code’s (“Code”) grant of tax exemption for certain nonprofit
organizations that do not engage in substantial lobbying activities—and its
denial of tax-deductible contributions to those that do—does not violate the
First Amendment. 461 U.S. at 545–51. Specifically, § 501(c)(3) of the Code
allows taxpayers who contribute to tax-exempt, non-lobbying organizations to
                                         9
   Case: 11-50932     Document: 00512713387     Page: 10   Date Filed: 07/28/2014



                                 No. 11-50932
deduct the amount of their contributions on their federal income tax returns.
Id. at 543. Section 501(c)(4) grants tax-exempt status to certain nonprofit
organizations, but contributions to these 501(c)(4) organizations are not tax-
deductible. Id. In upholding these provisions, the Court explained:
      Both tax exemptions and tax-deductibility are a form of subsidy
      that is administered through the tax system. A tax exemption has
      much the same effect as a cash grant to the organization of the
      amount of tax it would have to pay on its income. Deductible
      contributions are similar to cash grants of the amount of a portion
      of the individual’s contributions. The system Congress has
      enacted provides this kind of subsidy to non profit civic welfare
      organizations generally, and an additional subsidy to those
      charitable organizations that do not engage in substantial
      lobbying. In short, Congress chose not to subsidize lobbying as
      extensively as it chose to subsidize other activities that non profit
      organizations undertake to promote the public welfare.

Id. at 544 (footnote omitted).
      The Court noted that the Code allows a 501(c)(3) organization to create
a 501(c)(4) organization to conduct its lobbying activities. Id. Importantly,
however, a § 501(c)(3) organization could not subsidize its § 501(c)(4) affiliate
because “public funds might be spent on an activity Congress chose not to
subsidize.” Id. Thus, the Court equated tax-deductible donations to “public
funds,” since the donor can then reduce his or her taxable income by this
amount.    In this way, Taxation with Representation indicates that the
government’s indirect grant of public funds, vis-á-vis the tax deductions, allows
the government to condition the nonprofit organizations’ receipt of those tax-
deductible donations on certain First Amendment restrictions.
      Rust upheld certain conditions on federal funds for family planning
services that required that service providers not advocate for abortion or
provide abortion counseling with funds for the program, Title X. 500 U.S. at
178–81, 203. The Court stated: “[W]e have here not the case of a general law

                                       10
    Case: 11-50932       Document: 00512713387        Page: 11     Date Filed: 07/28/2014



                                      No. 11-50932
singling out a disfavored group on the basis of speech content, but a case of the
Government refusing to fund activities, including speech, which are
specifically excluded from the scope of the project funded.” Id. at 194–95. The
Court relied on its precedent upholding conditions that would violate the
Constitution if not attached to a grant of public funds. Id. at 195 n.4 (“We have
recognized that Congress’ power to allocate funds for public purposes includes
an ancillary power to ensure that those funds are properly applied to the
prescribed use.”).
       The common thread in Rust and Taxation with Representation is that the
government may attach certain speech restrictions to funds linked to the public
treasury—when either granting cash subsidies directly from the public coffers
(Rust) or approving the withholding of funds that otherwise would go to the
public treasury (Taxation with Representation). See also Nat’l Endowment for
the Arts v. Finley, 524 U.S. 569, 587–88 (1998) (“[A]lthough the First
Amendment certainly has application in the subsidy context, we note that the
Government may allocate competitive funding according to criteria that would
be impermissible were direct regulation of speech or a criminal penalty at
stake.”).   The bingo program in Texas is wholly distinguishable from the
subsidies in Taxation with Representation and Rust simply because no public
monies or “spending” by the state are involved. 3


       3 Two later Supreme Court cases, Davenport v. Washington Education Association,
551 U.S. 177 (2007) and Ysursa v. Pocatello Education Association, 555 U.S. 353 (2009), are
also inapposite because the Bingo Act creates a licensing program and not a subsidy. In
Davenport, the Court upheld a law requiring that labor unions receive affirmative
authorization from a nonmember before spending that nonmember’s fees for election-related
purposes when the fees were collected by a government employer. 551 U.S. at 191. The Court
relied on the principles underlying its treatment of situations where the “government is
acting in a capacity other than as regulator” and where the government subsidizes speech in
reaching this holding. Id. at 188–89. However, in the instant case, the government is acting
as a regulator and is not subsidizing speech; therefore, these underlying principles are
inapplicable. In Ysursa, the Court held that Idaho was not required to allow a public-sector
employee to deduct from his wages directly to the union’s political action committee when
                                            11
    Case: 11-50932       Document: 00512713387          Page: 12     Date Filed: 07/28/2014



                                       No. 11-50932
       The Commission’s interpretation contorts the definition of “subsidy.”
The Black’s Law Dictionary defines “subsidy” as follows:
       A grant, made by the government, to any enterprise whose
       promotion is considered to be in the public interest. Although
       governments sometimes make direct payments (such as cash
       grants), subsidies are [usually] indirect. They may take the form
       of research-and-development support, tax breaks, provision of raw
       materials at below-market prices, or low-interest loans or low-
       interest export credits guaranteed by a government agency.

Black’s Law Dictionary 1565 (9th ed. 2009). The licensing scheme in the Bingo
Act does not fall into even a broad interpretation of these examples of
“grants . . . made by the government.” See id. There is no direct or indirect
receipt of funds from the public fisc. The only “grant” here is the legislative
authority to conduct what would be illegal otherwise—bingo games.
       Moreover, the bingo games are not state-run; they are merely licensed
and regulated by the state.            The Commission argues that the program
constitutes a subsidy in part because there is no functional difference between
the current structure of the program and an alternative structure where the
state runs the bingo games and then distributes the funds to the Charities
itself. This argument is unavailing. In the latter scenario, the state would
expend its own resources to conduct the games and make all business
decisions, and the Charities would be mere passive beneficiaries of the state’s
grace. Cf. Taxation with Representation, 461 U.S. at 549 (“[A]ppropriations
are comparable to tax exemptions and deductions, which are also ‘a matter of
grace [that] Congress can, of course, disallow . . . as it chooses.’” (citation



Idaho did allow the employee to deduct from his wages union dues. 555 U.S. at 355. In so
holding, the Court relied on Taxation with Representation and noted that by allowing this
deduction, the government was not required to aid the unions in their political speech. Id. at
359. Here, however, the Charities, not the government, administer the bingo games
themselves in a manner similar to any other occupational license granted by the state.
                                             12
   Case: 11-50932     Document: 00512713387      Page: 13   Date Filed: 07/28/2014



                                  No. 11-50932
omitted)). Here, however, the Commission’s own website describes bingo as a
“business.” The bingo programs are run completely by the Charities and any
funds raised are the result of the Charities’ own efforts. The Charities pay the
state an annual licensing fee as well as five percent of each bingo prize
awarded. Tex. Occ. Code Ann. §§ 2001.104, 2001.502.
        The premise upon which Taxation with Representation and Rust are
based—that the state has broad authority under its spending powers to attach
conditions to its grant of public funds—is thus inapposite to the facts of this
case.    Rather, the Bingo Act’s regulatory scheme is more akin to an
occupational license, where the state grants an entity that satisfies certain
qualifying criteria the authority to do what would be illegal in the absence of
the license—here, conduct bingo games. See Black’s Law Dictionary 1002
(defining “license,” in relevant part, as “[a] permission, [usually] revocable, to
commit some act that would otherwise be unlawful”). The Charities point to
several features of the bingo program that convincingly illustrate its primary
function as a regulatory scheme. For example, the Commission’s Charitable
Bingo Division is characterized as a “law enforcement agency.” See Tex. Att’y
Gen., Informal Letter Ruling No. OR2012–14155, 2012 WL 4041287, at *2
(Sept. 6, 2012). It regulates all bingo-related activities, including the types of
games played, game frequency and times, and bingo-employee qualifications.
Tex. Occ. Code Ann. §§ 2001.055, 2001.419, 2001.313.             The provision’s
placement in Texas’s Occupations Code further supports its characterization
as an occupational license. All these features underscore the incongruity of the
“subsidy” paradigm to the bingo program here.
        As one court aptly stated, “simply because both subsidies and licenses
enure a benefit does not mean they are one and the same. . . . [The government]
may not use its regulatory powers to influence or penalize speech.” Satellite
Broad. & Commc’ns Ass’n of Am. v. FCC, 146 F. Supp. 2d 803, 830 (E.D. Va.
                                       13
    Case: 11-50932       Document: 00512713387          Page: 14     Date Filed: 07/28/2014



                                       No. 11-50932
2001), aff’d, 275 F.3d 337 (4th Cir. 2001) (citations omitted). Accordingly, we
hold that the Bingo Act creates a regulatory regime that grants the Charities
a benefit—in the form of a license—to conduct bingo games, rather than a
government subsidy. The Bingo Act’s restrictions are thus subject to the
Supreme Court’s jurisprudence relating to the “unconstitutional conditions
doctrine” and laws burdening political speech.
              2. The Bingo Act includes unconstitutional conditions.
       The “unconstitutional conditions doctrine” is well-established:

       For at least a quarter-century, this Court has made clear that even
       though a person has no “right” to a valuable governmental benefit
       and even though the government may deny him the benefit for any
       number of reasons, there are some reasons upon which the
       government may not rely. It may not deny a benefit to a person on
       a basis that infringes his constitutionally protected interests—
       especially, his interest in freedom of speech.

Perry v. Sindermann, 408 U.S. 593, 597 (1972); see also Rumsfeld v. Forum for
Academic & Institutional Rights, Inc., 547 U.S. 47, 59 (2006) (citation omitted)
(re-affirming the unconstitutional conditions doctrine). 4
       A state’s mere licensing of an entity does not empower the state to attach
unconstitutional restrictions to the granting of that license. For example, in



       4 The Supreme Court has not treated the unconstitutional conditions doctrine as an
absolute prohibition. In other contexts, it has suggested that certain conditions that abridge
constitutional rights can sometimes be constitutional conditions. See Nollan v. Cal. Coastal
Comm’n, 483 U.S. 825, 836 (1987) (“[T]he Commission’s assumed power to forbid construction
of the house in order to protect the public’s view of the beach must surely include the power
to condition construction upon some concession by the owner, even a concession of property
rights, that serves the same end.”). If the greater power to prohibit gambling for a good
reason includes the lesser power to condition for the same reason, Texas has not exercised its
lesser power to condition for such a reason. The doctrine is perhaps best summed up by
Dolan v. City of Tigard: “Under the well-settled doctrine of ‘unconstitutional conditions,’ the
government may not require a person to give up a constitutional right . . . in exchange for a
discretionary benefit conferred by the government where the benefit sought has little or no
relationship to [the right].” 512 U.S. 374, 385 (1994) (emphasis added) (citations omitted).
                                             14
    Case: 11-50932        Document: 00512713387     Page: 15    Date Filed: 07/28/2014



                                    No. 11-50932
44 Liquormart, Inc. v. Rhode Island, the Supreme Court held unconstitutional
under the First Amendment a state’s statutory prohibition against
advertisements that provided the public with accurate information relating to
liquor prices. 517 U.S. 484, 489 (1996) (plurality op.). In so ruling, the Court
reasoned:
       That the State has chosen to license its liquor retailers does not
       change the analysis. Even though government is under no
       obligation to provide a person, or the public, a particular benefit,
       it does not follow that conferral of the benefit may be conditioned
       on the surrender of a constitutional right.

Id. at 513 (citing, inter alia, Bates v. State Bar of Ariz., 433 U.S. 350, 355 (1977)
(licensed attorneys); Va. Bd. of Pharmacy v. Va. Citizens Consumer Council,
Inc., 425 U.S. 748, 770 (1976) (licensed pharmacists)); see also R.S.W.W., Inc.
v. City of Keego Harbor, 397 F.3d 427, 434 (6th Cir. 2005) (“Under the
unconstitutional conditions doctrine, ‘a state actor cannot constitutionally
condition the receipt of a benefit, such as a liquor license or an entertainment
permit, on an agreement to refrain from exercising one’s constitutional rights
. . . .’” (citation omitted)). 5
       We conclude that because the subsidy rationale is inapplicable, the
unconstitutional conditions doctrine controls. Congress and, by extension,
state legislatures may not condition the conferral of a government benefit on


       5Notably, the foregoing cases striking down First Amendment restrictions on
a state’s grant of a license took place in the commercial speech context. “The
Constitution . . . affords a lesser protection to commercial speech than to other
constitutionally guaranteed expression.” United States v. Edge Broad. Co., 509 U.S.
418, 426 (1993) (citations omitted). The argument is therefore even more compelling
that the restrictions on political speech here are suspect under the unconstitutional
conditions doctrine. See R.A.V. v. City of St. Paul, 505 U.S. 377, 422 (1992) (Stevens,
J., concurring in judgment) (“Our First Amendment decisions have created a rough
hierarchy in the constitutional protection of speech. Core political speech occupies
the highest, most protected position; commercial speech . . . [is] regarded as a sort of
second-class expression . . . .”).
                                          15
    Case: 11-50932     Document: 00512713387     Page: 16    Date Filed: 07/28/2014



                                  No. 11-50932
the forfeiture of a constitutional right. 44 Liquormart, Inc., 517 U.S. at 515.
Accordingly, we address whether the conditions are unconstitutional burdens
on political speech.
              3. The provisions burden political speech.
      As the Supreme Court instructed in Citizens United, “[l]aws that burden
political speech are subject to strict scrutiny, which requires the Government
to prove that the restriction furthers a compelling interest and is narrowly
tailored to achieve that interest.” 558 U.S. at 340 (internal quotation marks
and citation omitted). The Commission argues that the challenged provisions
do not burden political speech; however, the express language of the Bingo Act
belies that proposition. The provisions at issue prohibit the Charities from
using their bingo proceeds to “support or oppose a measure submitted to a vote
of the people; or [] influence or attempt to influence legislation.” Tex. Occ. Code
Ann. § 2001.456(2)–(3). While the provisions limit the Charities’ use of bingo
funds, they are nevertheless targeted at political speech. Any argument to the
contrary is dubious at best. In this respect, the Bingo Act’s restrictions are
distinguishable from the provisions at issue in Southern Christian Leadership
Conference.
      In Southern Christian Leadership Conference, the Louisiana Supreme
Court promulgated a rule prohibiting non-attorney student members of clinics
from representing as attorneys any client that the clinic had solicited.       252
F.3d at 785. This court determined that such a rule neither prohibited nor
prevented speech of any kind. Id. at 789. Importantly, the provision had no
bearing on the speech component of the rule—the actual solicitation of clients.
Id. It merely prohibited any non-lawyer students of the clinic from directly
representing such clients.      Id.   The clinics’ supervising attorneys could
represent the solicited clients and the students could work on the cases in other
capacities. Id. at 792. The restriction was on representation—it limited the
                                        16
    Case: 11-50932    Document: 00512713387         Page: 17   Date Filed: 07/28/2014



                                  No. 11-50932
circumstances under which non-attorneys could act as attorneys. See id. By
contrast, the restrictions at issue in this case explicitly and directly limit the
Charities’ ability to engage in political speech.
      Because the challenged provisions constitute facial restrictions on the
Charities’ political speech, strict scrutiny applies. Therefore, the Commission
must demonstrate that the provisions serve a compelling interest and are
narrowly tailored to satisfy that interest. See Citizens United, 558 U.S. at 340.
            4. The provisions cannot withstand strict scrutiny.
      The Commission fails to identify a compelling state interest. It raises
three rationales in support of the challenged provisions: 1) regulating
gambling, including reducing the size of the gambling industry in Texas; 2)
combating fraud by ensuring that bingo proceeds are only used in support of
charities, not lobbyists; and 3) promoting charities—that is, ensuring charities
do not forgo spending their bingo revenue on their charitable purpose by
squandering those funds on political advocacy. Notably, as the Charities and
the district court stated, the Commission never attempts to characterize these
interests as compelling. Indeed, the Commission never purports to justify the
challenged provisions under strict scrutiny review. Rather, the Commission
merely contends that the rationales are substantial state interests.
      The Commission’s first interest—regulating gambling—fails to properly
support the challenged provisions under strict scrutiny. While the Supreme
Court has recognized regulating gambling as a substantial state interest, see
Greater New Orleans Broad. Ass’n v. United States, 527 U.S. 173, 185–86
(1999), there is no authority suggesting that it is a compelling interest.
Moreover, we fail to see how Texas’s interest in regulating gambling is
furthered by restricting the Charities’ political speech, which may or may not
relate to gambling, and the Commission has failed to present any convincing
argument to that effect. See 44 Liquormart, Inc., 517 U.S. at 512 (“[T]he First
                                        17
    Case: 11-50932       Document: 00512713387        Page: 18     Date Filed: 07/28/2014



                                      No. 11-50932
Amendment directs that government may not suppress speech as easily as it
may suppress conduct, and that speech restrictions cannot be treated as simply
another means that the government may use to achieve its ends.”).
       Equally troubling is the underinclusiveness of the challenged provisions.
Whereas the Bingo Act constrains the Charities’ political speech, see Tex. Occ.
Code Ann. § 2001.456(2)–(3), other gambling operators, such as horse and dog
racetrack operators, remain free to engage in unfettered political advocacy, see
Tex. Rev. Civ. Stat. art. 179e § 1.02 (2012). Such obvious underinclusiveness
undermines any argument that Texas is truly interested in regulating
gambling. See The Fla. Star v. B.J.F., 491 U.S. 524, 540 (1989) (“[T]he facial
underinclusiveness of § 794.03 raises serious doubts about whether Florida is,
in fact, serving, with this statute, the significant interests which appellee
invokes in support of affirmance.”); FCC v. League of Women Voters of Cal., 468
U.S. 364, 396 (1984) (“The patent . . . underinclusiveness of § 399’s ban
undermines the likelihood of a genuine [governmental] interest . . . .”
(alteration in original) (internal quotation marks and citation omitted)).
Moreover, as the Supreme Court noted in Citizens United, the First
Amendment prohibits “restrictions distinguishing among different speakers,
allowing speech by some but not others.” 6 558 U.S. at 340.
       The Commission’s remaining interests—combating fraud and promoting
charities—are equally unpersuasive. Similar to the Commission’s interest in
regulating gambling, the Commission has failed to explain how its interests in
combating fraud and promoting charities are furthered by infringing on the



       6The Commission has not articulated a compelling reason justifying the differential
treatment of bingo operators and dog and horse racetrack operators. To the contrary, the
Commission merely has recounted the history of gambling in Texas. While the development
of gambling may demonstrate differing regulatory schemes governing bingo gaming as
opposed to dog and horse racetracks, it fails to explain why one group’s political speech is
constrained but the other group’s political speech is not.
                                            18
    Case: 11-50932     Document: 00512713387      Page: 19   Date Filed: 07/28/2014



                                   No. 11-50932
Charities’ political speech. The Commission’s supposition that Texans are
defrauded when Charities allocate a portion of their bingo proceeds to political
advocacy is unfounded. Further, the Supreme Court previously has found such
paternalistic justifications unavailing. See Riley v. Nat’l Fed’n of the Blind of
N.C., Inc., 487 U.S. 781, 790–91 (1988) (“The State’s remaining justification—
the paternalistic premise that charities’ speech must be regulated for their own
benefit—is equally unsound.        The First Amendment mandates that we
presume that speakers, not the government, know best both what they want
to say and how to say it.” (collecting citations)).
      Even assuming that the Commission’s interests are compelling, the
challenged provisions are not narrowly tailored to achieve those ends. A law
is narrowly tailored if it “actually advances the state’s interest . . . , does not
sweep too broadly . . . , does not leave significant influences bearing on the
interest unregulated (is not underinclusive), and could be replaced by no other
regulation that could advance the interest as well with less infringement of
speech (is the least-restrictive alternative).” Republican Party of Minn. v.
White, 416 F.3d 738, 751 (8th Cir. 2005) (en banc) (citations omitted).
      There are a myriad of alternatives available to the Commission to assist
it in regulating the gambling industry, combating fraud, and promoting
charities. See, e.g., Greater New Orleans Broad., 527 U.S. at 192 (suggesting
nonspeech alternatives for curtailing gambling). Any possibility of fraud could
be easily addressed by imposing public disclosure requirements on charities.
See, e.g., Vill. of Schaumburg v. Citizens for a Better Env’t, 444 U.S. 620, 637–
38 (1980) (reasoning that “promot[ing] disclosure of the finances of charitable
organizations also may assist in preventing fraud by informing the public of
the ways in which their contributions will be employed”).              As for the
Commission’s interest in promoting charities by ensuring that bingo proceeds
are spent on charitable purposes, the Bingo Act already mandates that bingo
                                        19
    Case: 11-50932   Document: 00512713387      Page: 20   Date Filed: 07/28/2014



                                 No. 11-50932
proceeds be used in furtherance of the Charities’ charitable purposes. Tex. Occ.
Code Ann. § 2001.454 (“A licensed authorized organization shall devote to the
charitable purposes of the organization its net proceeds of bingo and any rental
of premises.”).
      Accordingly, the political advocacy restrictions in the Bingo Act do not
withstand strict scrutiny. Not only has the Commission failed to articulate a
compelling interest justifying the challenged provisions, but even if we were to
accept the interests raised by the Commission as compelling, the restrictions
are not narrowly tailored. Consequently, the provisions at issue are facially
invalid under the First Amendment.
                                IV. CONCLUSION
      Accordingly, we affirm the district court’s permanent injunction and
summary judgment.




                                      20
    Case: 11-50932      Document: 00512713387      Page: 21    Date Filed: 07/28/2014



                                    No. 11-50932


JAMES L. DENNIS, Circuit Judge, joined by DeMOSS and GRAVES, Circuit
Judges, dissenting:
      Although I am in sympathy with the majority’s desire to promote strong
First Amendment protection of political speech, in my view, the Supreme
Court’s decisions in Ysursa v. Pocatello Education Association, 555 U.S. 353
(2009), Davenport v. Washington Education Association, 551 U.S. 177 (2007),
and Regan v. Taxation with Representation of Washington, 461 U.S. 540 (1983),
do not permit us to apply strict or heightened scrutiny necessary for us to strike
down the particular type of alleged speech restriction at issue in this case.
      Ysursa involved Idaho laws under which government employees were
given the option of having the government, as their employer, deduct a portion
of their wages to pay their union dues. Government employees, however, were
not allowed to have the government deduct a portion of their wages to remit to
the union’s political action committee.        Unions representing Idaho public
employees challenged this limitation as a violation of their First Amendment
rights.   The Supreme Court rejected the challenge because, the Court
explained, while the First Amendment operates as a negative restraint to
forbid the government from “abridging the freedom of speech,” the amendment
“does not confer an affirmative right to use government payroll mechanisms
for the purpose of obtaining funds for expression.” 555 U.S. at 355. The Court
elaborated:
                    While publicly administered payroll deductions
              for political purposes can enhance the unions’ exercise
              of First Amendment rights, Idaho is under no
              obligation to aid the unions in their political activities.
              And the State’s decision not to do so is not an
                                          21
   Case: 11-50932      Document: 00512713387     Page: 22   Date Filed: 07/28/2014



                                  No. 11-50932


              abridgment of the unions’ speech; they are free to
              engage in such speech as they see fit. They simply are
              barred from enlisting the State in support of that
              endeavor.

      Id. at 359. The challenged Idaho laws did not “restrict political speech,”
the Court concluded, but merely “decline[d] to promote that speech by allowing
public employee checkoffs for political activities.” Id. at 355. Thus, because
the state did “not infringe[] the unions’ First Amendment rights,” the Court
held that the challenged laws were subject to only “deferential” “rational basis”
review. Id. at 359, 362.
      In Ysursa, the Court relied on its prior decision in Davenport, stating
that it “guides our resolution here.” Id. at 360. In Davenport, the Court
addressed Washington state laws under which unions of government
employees were authorized to levy “agency fees” on employees who were not
union members but were nevertheless benefited by the union’s collective
bargaining.    The union was not allowed, however, to spend such fees on
political speech unless “affirmatively authorized” by the person from whom the
fee was recovered.     551 U.S. at 182 (quoting statute).     That “affirmative
authorization” restriction was at issue.     The Court upheld the challenged
statute, “recogniz[ing],” as the Ysursa Court explained, “that the statute,
rather than suppressing union speech, simply declined to assist that speech by
granting the unions the right to charge agency fees for election activities.”
Ysursa, 555 U.S. at 361 (citing Davenport, 551 U.S. at 188-90).
      Third is Regan, on which both Ysursa and Davenport relied. There, the
Court upheld the federal tax code’s refusal to provide certain tax benefits for

                                          22
    Case: 11-50932    Document: 00512713387        Page: 23   Date Filed: 07/28/2014



                                  No. 11-50932


political lobbying, explaining that, “Congress has not infringed any First
Amendment rights or regulated any First Amendment activity,” but has
“simply chosen not to pay for . . . lobbying.” 461 U.S. at 546. In Ysursa, the
Court stated that the government’s “decision not to assist fundraising” “is
simply not the same as directly limiting expression” and cited Regan in support
of the distinction. Ysursa, 555 U.S. at 360 n.2 (citing Regan, 461 U.S. at 550).
And in Davenport, the Court cited Regan for the proposition that the First
Amendment “does not require the government to enhance a person’s ability to
speak.” Davenport, 551 U.S. at 190.
      It appears to me that the Texas charitable bingo program is analogous
to the circumstances addressed in Ysursa, Davenport, and Regan.                 The
charitable bingo program should not be considered in a void, but rather in its
proper context. Cf. ante, at 16 (calling the argument that charitable bingo does
not burden political speech “dubious at best” because the statute’s text is
“targeted at political speech”). We start from the contextual premise that, as
a matter of law, gambling, including bingo, “implicates no constitutionally
protected right” and rather “falls into a category of ‘vice’ activity that could be,
and frequently has been, banned altogether.” United States v. Edge Broad.
Co., 509 U.S. 418, 426 (1993); see also There to Care, Inc. v. Comm’r of Ind.
Dep’t of Revenue, 19 F.3d 1165, 1167 (7th Cir. 1994) (“Gambling has
traditionally been closely regulated or even forbidden, without anyone
suspecting that these restrictions violate the first amendment.”). And as a
matter of contextual fact, in Texas, bingo and other gambling has been
prohibited for most of the state’s history.
      It was not until 1980 that Texas voters amended the state constitution
to allow charitable bingo as an exception to the general prohibition on
                                              23
    Case: 11-50932        Document: 00512713387           Page: 24    Date Filed: 07/28/2014



                                       No. 11-50932


gambling, see TEX. CONST. art. III, § 47, and not until 1981 that the legislature
enacted the Bingo Enabling Act, see TEX. OCC. CODE § 2001.001 et seq., which
allows bingo to operate in the state in only very limited circumstances. Under
the Act, only specified categories of religious and nonprofit organizations
(certain “religious societies,” “nonprofit organizations whose predominant
activities are for the support of medical research or treatment programs,”
“fraternal     organizations,”       “veterans         organizations,”     “volunteer      fire
departments,” and “volunteer emergency medical services providers”) are
allowed, if licensed, to host bingo games on condition that they use their bingo
proceeds to support the “charitable purposes” of the organization.                          Id.
§§ 2001.101, 2001.454. They are not, however, permitted to use their bingo
proceeds, but they may use any other funds, to “support or oppose a measure
submitted to a vote of the people” or to “influence or attempt to influence
legislation.” Id. § 2001.456. 1
       The 1981 charitable bingo program represents a legislative judgment
that, although the longstanding general prohibition on gambling should stand,
the social costs that support the suppression of gambling are outweighed in
limited circumstances.         That is, regulated bingo should be permitted, the
legislature decided, if it means that health clinics for the poor have more funds
for medical services, that volunteer fire departments have more funds to
protect their communities, etc. The charitable bingo program is, in essence, a
legislative effort at promoting those aims, which the legislature has identified
as sufficiently worthy to warrant an exception to the gambling ban.


       1Texas law also prohibits charitable bingo licensees from using their bingo proceeds
to “support or oppose a candidate or slate of candidates for public office,” but the plaintiffs-
appellees here do not challenge that restriction.
                                                  24
   Case: 11-50932    Document: 00512713387     Page: 25   Date Filed: 07/28/2014



                                No. 11-50932


      Viewed in such light, it appears, under the reasoning of Ysursa,
Davenport, and Regan, that the charitable bingo program’s limitation against
the use of bingo proceeds for lobbying and other political speech, which the
legislature has decided not to promote, does not “suppress” that speech, thus
subjecting the statute to strict or heightened scrutiny under the First
Amendment. Pre-1981, before the charitable bingo program was created, the
appellees here could use their general funds for any political advocacy they
desired. The creation of charitable bingo in 1981 did nothing to change that.
Today, with the charitable bingo program in place, the appellees remain
equally free to use their general funds for any political advocacy they desire.
They are only restricted from using their new, post-1981 charitable bingo
proceeds, which they were previously prohibited from obtaining, for political
advocacy. In other words, the appellees’ only grievance with the charitable
bingo program that Texas created in 1981 is that it does not “assist [them] in
funding the expression of [certain political speech].” Ysursa, 555 U.S. at 358.
But, as the Supreme Court has said, the First Amendment “does not require
the government to enhance a person’s ability to speak.” Davenport, 551 U.S.
at 190 (citing Regan, 461 U.S. at 549-50).
      Therefore, under the reasoning of Ysursa, Davenport, and Regan, I
respectfully dissent from the majority’s striking down the challenged parts of
the Texas charitable bingo program under strict or heightened scrutiny.




                                         25
   Case: 11-50932     Document: 00512713387     Page: 26   Date Filed: 07/28/2014



                                 No. 11-50932


JAMES E. GRAVES, Circuit Judge, joined by DeMOSS and DENNIS, Circuit
Judges, dissenting.
      I fully join Judge Dennis in dissenting from the majority opinion, which
strikes down the challenged parts of the Texas charitable bingo program under
strict scrutiny. However I write separately to address the majority’s holdings
that the Bingo Act does not create a subsidy and that the unconstitutional
conditions doctrine applies in this case.
      The Texas Constitution bans gambling. However, in 1980, Texas voters
approved an amendment establishing an exception for charitable bingo. The
Texas Bingo Enabling Act, passed in 1981, allows qualifying Texas charities to
obtain a license to hold bingo games so long as all proceeds are spent in Texas
and used for charitable purposes. The Act prohibits the use of bingo proceeds
to support or oppose political candidates, to support or oppose ballot measures,
or for lobbying. However, charities are not prohibited from using their own
money for these purposes.
      The Charities brought a facial challenge of the Act, asserting that the
restrictions violate their First Amendment rights to free speech. The district
court agreed and granted summary judgment for the charities. The district
court also granted an injunction preventing enforcement of the challenged
provisions. A panel of this court reversed the district court. On en banc
rehearing, the majority now affirms the district court’s permanent injunction
and summary judgment. In affirming the district court, the majority concludes
that the Bingo Act does not provide a subsidy to the Charities and that it
includes unconstitutional conditions. I disagree.
      In general terms, “the unconstitutional-conditions doctrine examines the
extent to which government benefits may be conditioned or distributed in ways
                                       26
   Case: 11-50932     Document: 00512713387     Page: 27   Date Filed: 07/28/2014



                                 No. 11-50932


that burden constitutional rights or principles.” Pace v. Bogalusa City Sch.
Bd., 403 F.3d 272, 286 (5th Cir. 2005). One of the most frequently cited cases
discussing the doctrine is Perry v. Sindermann, 408 U.S. 593, 92 S.Ct. 2694, 33
L.Ed.2d 570 (1972). That case involved a claim by a professor at a state
university alleging that his right to free speech was violated because he was
discharged for publicly criticizing the university's administrative policies. Id.
at 594–96. The Court held that the denial of a government benefit (a teaching
position) cannot be predicated on the exercise of a constitutional right.
      However, the Supreme Court has also held that when the government
provides a subsidy it is entitled to define the parameters of the subsidized
program, even if that means excluding certain types of speech. The Supreme
Court explained this principle in Rust v. Sullivan, 500 U.S. 173, 111 S.Ct. 1759,
114 L.Ed.2d 233 (1991). In Rust, the Court held that that the unconstitutional
conditions doctrine did not apply because “the Government is not denying a
benefit to anyone, but is instead simply insisting that public funds be spent for
the purposes for which they were authorized. The ... regulations do not force
the ... grantee to give up abortion-related speech; they merely require that the
grantee keep such activities separate and distinct from [program] activities.”
Id. at 196. Responding to the service providers' argument that the speech
restrictions constituted impermissible viewpoint discrimination, the Court
expounded on the concept that government may subsidize certain activities
and not others:
             The Government can, without violating the Constitution,
      selectively fund a program to encourage certain activities it
      believes to be in the public interest, without at the same time
      funding an alternative program which seeks to deal with the
      problem in another way. In so doing, the Government has not

                                          27
   Case: 11-50932     Document: 00512713387      Page: 28   Date Filed: 07/28/2014



                                  No. 11-50932


      discriminated on the basis of viewpoint; it has merely chosen to
      fund one activity to the exclusion of another. A legislature's
      decision not to subsidize the exercise of a fundamental right does
      not infringe the right. A refusal to fund protected activity, without
      more, cannot be equated with the imposition of a penalty on that
      activity. There is a basic difference between direct state
      interference with a protected activity and state encouragement of
      an alternative activity consonant with legislative policy.

      Id. at 193 (emphasis added) (internal quotations and citations omitted).
      The Court also applied this principle in Regan v. Taxation with
Representation of Washington, 461 U.S. 540, 103 S.Ct. 1997, 76 L.Ed.2d 129
(1983), which involved restrictions similar to those at issue here. In Regan,
the Court held that the statute prohibiting tax exemptions for organizations
whose activities include a substantial amount of lobbying did not violate the
unconstitutional conditions doctrine. Specifically, the Court noted that the
plaintiff remained free to exercise its speech rights (lobby) outside the scope of
the government tax exemption program. Id. at 544–45. The Court equated
the tax exemption to a government subsidy and held that the restrictions were
simply a choice by the government not to subsidize lobbying. Id. at 544, 545–
46. The Court made clear that the government's decision not to subsidize the
exercise of a constitutional right does not equate to a penalty on the right. See
id. at 546 (“Congress has not infringed any First Amendment rights or
regulated any First Amendment activity. Congress has simply chosen not to
pay for [plaintiff's] lobbying.”); id. at 549 (“We have held in several contexts
that a legislature's decision not to subsidize the exercise of a fundamental right
does not infringe the right....”); see also United States v. Am. Library Ass'n,
Inc., 539 U.S. 194, 210–12, 123 S.Ct. 2297, 156 L.Ed.2d 221 (2003) (rejecting
an argument that libraries' speech rights were violated by requiring that they
                                          28
    Case: 11-50932    Document: 00512713387      Page: 29    Date Filed: 07/28/2014



                                  No. 11-50932


restrict internet access in order to receive a federal subsidy because “[a] refusal
to fund protected activity, without more, cannot be equated with the imposition
of a ‘penalty’ on that activity” (quoting Rust, 500 U.S. at 193)).
      The Charities argue, and the majority agrees, that the State's charitable
bingo program cannot be construed as a subsidy because it is implemented by
means of a licensing scheme instead of cash payments or tax exemptions. The
majority concludes that Rust and Regan are distinguishable because “no public
monies or ‘spending’ by the state are involved” in the bingo program in Texas.
(Maj. Op. at 316-318).      I disagree, as these arguments place form over
substance. In creating the charitable bingo program, the State established a
narrow exception to the State's ban on bingo in order to allow a limited group
of charities to conduct bingo games, free of competition, to generate extra
revenue. As the Texas Constitution makes clear, this extra revenue is
authorized to the limited extent that it is used for the charitable purposes of
the organization. See Tex. Const. art. III, § 47(b). That this supplemental
income stream is accessible by way of a license, instead of cash payments or a
tax exemption, does not change the fact that the bingo program constitutes a
government subsidy for participating charities. Notwithstanding the existence
of this income stream, the State also spends money to run the program, as
discussed more fully below.
      The majority says that the Commission “contorts the definition of
‘subsidy’” and cites Black’s Law Dictionary before concluding that “[t]here is
no direct or indirect receipt of funds from the public fisc.” (Maj. Op. at lines
319-20, 331-32). However, the definition quoted by the majority does not
include any such statement requiring “direct or indirect receipt of funds from
the public fisc.” (Maj. Op. at lines 321-223). The definition merely says a
                                           29
       Case: 11-50932   Document: 00512713387      Page: 30   Date Filed: 07/28/2014



                                    No. 11-50932


“grant, made by the government, to any enterprise whose promotion is
considered to be in the public interest.” Black’s Law Dictionary 1565 (9th ed.
2009).     The majority then concedes that there is, in fact, a grant by the
government here, i.e., “the legislative authority to conduct what would be
illegal otherwise – bingo games.” (Maj. Op. at lines 332-333). The majority
also concedes that the bingo program involves public monies and spending by
the state. Specifically, the bingo program requires Texas to spend money not
only on licensing, but also to essentially run a “law enforcement agency” and
regulate “all bingo-related activities, including the types of games played,
game frequency and times, and bingo-employee qualifications.” (Maj. Op. at
361, 363-364).
         While some of these are regulatory costs, the majority cites no controlling
authority for its conclusion that a bingo program is a regulatory scheme, which
is akin to an occupational license and, thus, cannot be a subsidy. The majority
cites a district court case from Virginia for the statement that, “simply because
both subsidies and licenses enure a benefit does not mean they are one and the
same. . . . [The government] may not use its regulatory powers to influence
or penalize speech.” Satellite Broad. & Commc’ns Ass’n of Am. v. FCC, 146 F.
Supp. 2d 803, 830 (E.D. Va. 2001), aff’d, 275 F.3d 337 (4th Cir. 2001). Notably,
the Fourth Circuit found it unnecessary to address the argument of whether
the statutory copyright license should be seen as a targeted government
subsidy because they found that the rule in question was consistent with the
First Amendment. Satellite Broad. & Commc’ns Ass’n of Am., 275 F.3d at 355,
n.6.
         There are, of course, many significant distinctions between a commercial
occupational license and a state charitable gaming program, created by the
                                             30
   Case: 11-50932     Document: 00512713387     Page: 31      Date Filed: 07/28/2014



                                 No. 11-50932


state constitution, that allows select charities to raise extra money through a
gambling activity on the condition the money is used for the organizations'
charitable purpose. Thus, under the definition of “subsidy” and the applicable
case law of Rust and Regan, the government may attach speech restrictions to
the bingo funds. See also Ysursa v. Pocatello Educ. Ass’n, 555 U.S. 353, 359
(2009); Davenport v. Washington Educ. Ass’n, 551 U.S. 177 (2007).
      The Charities and the district court relied on Citizens United, 558 U.S.
310, 130 S.Ct. 876, 175 L.Ed.2d 753 (2010), to support the conclusion that the
challenged   provisions   are   facially   unconstitutional     under    the   First
Amendment because they burden political speech. But, Citizens United is
distinguishable in two key respects. Citizens United involved a challenge to a
federal statute prohibiting corporations from making expenditures for speech
relating to federal elections. Id. at 320-21. Unlike this case, Citizens United
did not involve speech restrictions in the context of a government subsidy.
Here, the State has created a subsidy program where select charities are
permitted to engage in a gambling activity in order to raise extra money for
their charitable causes. As a condition of participating in the program, and
receiving the extra money, the state requires that the money not be used for
political advocacy. This requirement does not penalize political speech; it
simply represents a decision by the State not to subsidize that activity. See
Rust, 500 U.S. at 193 (“A legislature's decision not to subsidize the exercise of
a fundamental right does not infringe the right.” (quoting Regan, 461 U.S. at
549)); see also Am. Library Ass'n, 539 U.S. at 211–12.
      Citizens United is also distinguishable in that it involved a statute that
imposed an “outright ban” on specific types of political speech. Citizens United,
130 U.S. at 337. In other words, the restrictions in Citizens United completely
                                           31
   Case: 11-50932         Document: 00512713387         Page: 32    Date Filed: 07/28/2014



                                       No. 11-50932


foreclosed any way for corporations to engage in the prohibited political speech.
Id. However, the provisions at issue in this case only prohibit the use of bingo
proceeds for political advocacy and, therefore, only restrict speech within the
scope of the State's charitable bingo program.               As explained in Rust, the
unconstitutional conditions doctrine is implicated when government requires,
as a condition of participating in a government program, that the participant
not exercise a constitutional right outside the scope of the program. See Rust,
500 U.S. at 197 (“[O]ur ‘unconstitutional conditions' cases involve situations in
which the Government has placed a condition on the recipient of the subsidy
rather than on a particular program or service, thus effectively prohibiting the
recipient from engaging in the protected conduct outside the scope of the
federally funded program.”); see also Agency for Int'l Dev. v. Alliance for Open
Soc'y Int'l, Inc., No. 12–10, 570 U.S. ----, 133 S.Ct. 2321, 2328–31, 186 L.Ed.2d
398 (2013) (reaffirming this principle). The Bingo Act's political advocacy
restrictions fall within the government's power to subsidize some activities to
the exclusion of others and therefore do not penalize political speech. As the
Charities are not prohibited from engaging in lobbying or political speech
outside the scope of the bingo program, the unconstitutional conditions
doctrine is not implicated here.
      Moreover, even if the unconstitutional conditions doctrine was
implicated here, as Judge Dennis says, strict scrutiny is not appropriate.
Rather, the Commission would merely have to establish, at the very most, a
substantial state interest to justify the challenged provisions. 1 The majority
concedes that the Supreme Court has recognized the Commission’s first


      1   I am not suggesting that intermediate scrutiny applies.
                                                 32
    Case: 11-50932        Document: 00512713387          Page: 33     Date Filed: 07/28/2014



                                       No. 11-50932


interest of regulating gambling as a substantial state interest. See Greater
New Orleans Broad. Ass’n v. United States, 527 U.S. 173, 185-86 (1999). (Maj.
Op. at 465-468). 2
       For the reasons stated herein, the challenged provisions in this case do
nothing to restrict speech outside the scope of the State's bingo program.
Charities are free to participate in the bingo program and to engage in political
advocacy; they simply must not use bingo proceeds to do so. The Bingo Act's
restrictions on the use of bingo proceeds for political advocacy are permissible
conditions on a government subsidy and do not operate to penalize speech.
Thus, I respectfully dissent.




       2 The majority takes issue with Texas’ interest in regulating gambling based on the
ability of horse and dog racetrack operators being able to engage in “unfettered political
advocacy.” (Maj. Op. at 479). Despite the fact that Charities also enjoy a nonprofit or charity,
if you will, status and the ability to conduct bingo games unavailable to for-profit horse and
dog racetrack operators, the Charities are able to engage in “unfettered political advocacy”
with their own money.
                                                  33
