Texas Senators are taking a closer look at prediction markets’ role in the state’s gambling ecosystem. As the prediction market sector grows increasingly at odds with regulated sportsbooks, the American Gambling Association (AGA) is calling for strict state oversight over prediction platforms such as Kalshi and Polymarket. However, industry representatives disagree, insisting on federal regulation.
Opponents Argued That Prediction Markets Were Gambling
According to a recent Texas Scorecard report, state senators discussed whether prediction platforms should remain as federally regulated financial derivatives or be treated as another form of gambling subject to state oversight. The Texas Senate State Affairs Committee heard representatives from prediction platform Kalshi and the AGA, who presented opposing viewpoints.
Tres Yok, speaking for the AGA, contended that wagering on the outcome of a sports event is indistinguishable from gambling. He highlighted growing pushback in other states where state courts have mostly ruled against prediction platforms. In Nevada, for example, Kalshi was forced to implement a geofencing solution to block state residents from accessing its sports-related prediction contracts.
Texans were able to use prediction markets like Kalshi to put money down on who would win the Cowboys-Giants game. If they chose the right team, they get paid out. That’s a sports bet.
Tres Yok, AGA spokesperson
Gambling policy expert Brianne Doura-Schawohl agreed with the AGA, citing a recent study showing that 61% of US citizens viewed prediction markets as a type of gambling. Platforms like Kalshi have also faced criticism for using marketing language similar to that of regulated sportsbooks. Meanwhile, these companies often have less stringent customer protection safeguards than gambling operators.
Kalshi Pushed Back Against Allegations
Kalshi did not agree with calls for state-level regulation. Robert DeNault, the company’s head of enforcement and legal counsel, contended that prediction markets were just like any other financial derivative and were already regulated on the federal level by the Commodity Futures Trading Commission (CFTC). He also dismissed any similarities to traditional gambling.
DeNault took a firm stance against overly strict regulation, warning that an overzealous approach could push consumers toward illegal offshore operators with almost zero consumer protections. According to him, insider trading and integrity concerns were also overinflated, as prediction platforms had improved their monitoring systems to reduce such incidents.
What you’ll end up with is a bunch of customers here in Texas just going offshore to an even more dangerous platform.
Robert DeNault, Kalshi head of enforcement and legal counsel
Despite these assurances, some lawmakers were unconvinced, expressing their concerns about the potential abuse of sensitive information and the addiction risks associated with gambling. Many agreed that state-level regulation was necessary, preferably implemented in a way to avoid conflict with the CFTC, which is already involved in lawsuits against several states that tried to restrict the sector.