Texas Becomes Latest State to Target Prediction Markets

The prediction industry may have just made a powerful new enemy.

Texas Lt. Governor Dan Patrick has ordered the state Senate to investigate prediction markets and how to close the legal loopholes that allow them to operate. He has been the state’s strongest opponent of sports betting and is now extending that opposition to sports prediction markets as well.

“Study the sudden inundation of prediction market gambling and exploitation of federal law to circumvent Texas gambling prohibitions by allowing users to place bets on the outcome of elections and other events,” Patrick asked Senators. “Examine the relationship between federally regulated derivative markets and state-prohibited gambling.”

Currently, only the Commodity Futures Trading Commission (CFTC) has the authority to regulate the prediction industry. While some states have sought to pass laws banning it, the federal regulator’s support has kept operators online in all 50 states. It has also filed lawsuits against several states over their attempts to crack down on prediction markets.

Texas is one of the few states where mobile and retail sports betting remain illegal. While the industry has public support, the rise of betting scandals and problem gambling has eroded it. Consequently, the legislative path for Sports Betting in Texas remains a complex and highly debated issue during every session.

Has the Tide Officially Turned Against Prediction Markets?

While he will no longer admit it, President Trump remains the reason why prediction markets are legal across the US. His sons are on the payroll at Polymarket and Kalshi, and his media company is developing its own platform. He also attempted to put a board member from the latter at the head of the CFTC, before replacing him with another industry ally, Michael Selig.

Patrick has been a key ally for Trump over the years, making his surprising order even more significant. If he can show that Texans want prediction markets out, it would put more pressure on Trump to take action and at least force regulations or state control over the industry. 

Given the poor polling Republicans have had heading into the midterm elections, the White House can’t afford to lose Texas. That means they may be willing to work with the state to crack down on the largely unregulated prediction industry.