Texas Senate to examine prediction markets ahead of 2027 session

Texas lawmakers are preparing to scrutinize the growth of prediction market platforms, with Lieutenant Governor Dan Patrick directing the State Affairs Committee to study their legal and regulatory implications before the 2027 legislative session.

The directive places prediction markets among eight issues identified as priorities for interim review, with a focus on what officials describe as gaps in existing gambling laws.

A document issued by Patrick’s office called for lawmakers “[To] Study the sudden inundation of prediction market gambling and the exploitation of federal law to circumvent Texas gambling prohibitions by allowing users to place bets on the outcome of elections and other events.”

The committee has also been asked to examine “the relationship between federally regulated derivative markets and state-prohibited gambling” and develop recommendations aimed at protecting the integrity of elections and sports. The review is expected to explore whether event-based contracts offered by these platforms function in a way that resembles prohibited wagering under state law.

Texas has historically maintained a restrictive approach to gambling, with Patrick among the most prominent opponents of gaming expansion in the state.

Efforts to legalize casinos and online sports betting have repeatedly failed to advance in the Senate. Proposals by companies such as Las Vegas Sands to develop a casino resort in the Dallas-Fort Worth area have not gained traction.

The absence of legalized sports betting has contributed to the visibility of prediction markets in Texas, where users can speculate on outcomes ranging from elections to sports events through platforms operating under federal regulatory frameworks. While these platforms have gained traction, Texas has not yet been among the states actively scrutinizing yes-or-no exchanges at the regulatory level.

At the federal level, legislative efforts are also underway to address the scope of such markets. Representative Greg Casar and Senator Chris Murphy have introduced the Banning Event Trading on Sensitive Operations and Federal Functions Act, which seeks to prohibit prediction markets from offering derivatives tied to government actions, terrorism, war, and similar events where participants could influence outcomes.

At the state level, in California, Governor Gavin Newsom recently announced restrictions preventing state officials from using insider knowledge to profit on prediction markets.

“The ban further extends these prohibitions to prevent appointees from using insider information to help others, including spouses, children, other family members, business partners, or others, profit from such information,” according to a statement.

California lawmakers have also moved to address advertising practices related to these platforms. Assemblymember Mia Bonta introduced legislation aimed at limiting promotional activity by sportsbooks and prediction market operators. Bonta is married to Attorney General Rob Bonta, who has received campaign contributions from tribal casino operators in the state.

In Texas, lawmakers are expected to consider whether additional legislation is needed to address the overlap between federal derivatives regulation and state gambling prohibitions. The State Affairs Committee’s findings could inform future proposals aimed at clarifying definitions of gambling, tightening enforcement mechanisms, or restricting access to certain platforms.