Texas Doctors Question Gambling Versus Investing for Those Under 21

Prediction markets have spent millions of dollars and countless hours in court trying to convince state and federal judges that they aren’t gambling in dozens of cases across the US. But now, they may have an even tougher bar to clear as the Texas Medical Association (TMA) weighs in.

“Basically, you have a situation right now where high school seniors are legally walking around with Vegas in their pockets,” said Dr. Lindy McGee, an assistant professor at Baylor College of Medicine and the former chair of the Child and Adolescent Health Committee for TMA. “They can bet on just about anything.”

TMA Pushes for Stricter Age and Advertising Limits

The TMA, which represents more than 60,000 physicians across the Lone Star State, pulled no punches in a recent report. They are calling for strict regulations on prediction market platforms, including:

• Raising the minimum user age to at least 21 years old.

• Restricting advertising for these products near schools and parks.

• Imposing strict limits on social media advertising on any sites aimed primarily at teens.

• Enacting an outright ban on celebrities, cartoons, or other pitchmen who might appeal to the youth demographic.

The Federal vs. State Regulation Clash

The proposal highlights an increasingly common problem for Texas and other states across the country. Online sports betting in Texas is prohibited across the state. In fact, almost all forms of gambling remain prohibited. Prediction markets, however, fall under the federal jurisdiction of the Commodity Futures Trading Commission (CFTC).

In reality, that means customers as young as 18 can trade event contracts, including those based on sporting events, just as they would buy stock or trade options—despite the fact that state lawmakers have repeatedly, and rather loudly, refused to legalize traditional sports betting.

But Texans, whether they are MDs or not, aren’t known for beating around the bush or arguing semantics. As Dr. McGee made clear in her announcement of the organization’s position, "It is not considered gambling (by legal definition), although it has all of the psychological trappings of gambling."

Public Opinion and the Legal Battle Ahead

This whole "walks-like-a-duck, quacks-like-a-duck" argument has been made from courtrooms to Congress this past year. In a March Ipsos poll, more than 61% of Americans said they consider prediction market trading closer to gambling, while only 8% said it more closely resembled investing.

Public opinion, though, doesn’t determine whether something is a sports bet or a futures contract. That ultimately must be settled by either a new law or an interpretation of the old one, which means either Congress, the Supreme Court, or potentially both will need to step in.

Conflicting Court Rulings Pave the Way for the Supreme Court

That possibility became a strong probability on August 28, when a few hundred miles to the west, the Ninth Circuit Court of Appeals handed Nevada regulators a big win in their ongoing scrap with prediction market operator Kalshi.

The court ruled that Kalshi had failed to adequately show that federal law, specifically the Commodity Exchange Act, could preempt Nevada gaming law when it comes down to sporting event contracts. The Ninth Circuit said that these were indeed sports bets and not some convoluted, federally protected swaps, no matter how much Kalshi might argue them to be. Broadly, that means Nevada can continue to apply its laws and regulations to these contracts for now.

Of course, anyone following similar cases throughout the country, from New York to Washington State, will know that’s not the end of the matter. In New Jersey, in April, the Third Circuit Court reached almost the opposite conclusion in the Garden State's battle with Kalshi over state gaming laws. Now, with two federal appeals courts at loggerheads, it seems a foregone conclusion that the next stop will be the US Supreme Court.

Why Set the Minimum Age at 21?

Even if Texas and other states do wrestle back the authority to regulate prediction markets as gambling, the doctors' proposal raises another interesting question: Why 21?

After all, any 18-year-old Texan can legally open a brokerage account. Depending on the brokerage, many of these customers—not much older than a high school senior—would be approved to trade Nvidia options or even oil futures. Those are widely considered to be more complicated financial products than predicting whether the Longhorns will beat the Aggies by more than eight and a half points.

The TMA’s argument seems to be that, whatever label we ultimately decide on, the potential for harm to young people, especially young men aged 18 to 21, is exceptionally high. They point to studies linking that age group and gambling with a far higher potential for addiction, depression, and other financial difficulties. That, coupled with the ubiquity of smartphones and sports betting’s appeal to this demographic, could lead to a scourge of problem gambling.

Social Costs Without the Benefits

And that leaves Texas right back where it started. Lawmakers refused to legalize traditional sports betting due to high perceived social costs, yet prediction markets have arrived without so much as a subcommittee hearing. Now, the state finds itself facing down those same social costs, yet without the taxes, regulation, and responsible gaming funding that legalization might have brought.

Texas doctors would like to see a 21-year minimum age for a product that, at least for now, operates outside the state’s regulatory purview. In the end, it may not be doctors in Dallas or lawmakers in Austin that ultimately decide whether these prediction markets belong on Wall Street, Fremont Street, or somewhere increasingly uncomfortable in between.