Prediction Markets’ Rise Not Impetus for Texas to Legalize Sports Betting

California and Texas have long been viewed as the “golden geese” of the domestic online sports betting industry. The two most populous states remain off limits to sportsbooks, but prediction markets are operating in those jurisdictions, sparking hope and speculation that either or both states could consider legalizing internet sports wagering.

Don’t bet on Texas seeing things that way. While policymakers there are expected to consider sports betting legislation in 2027 — marking the fifth time in eight legislative sessions — some experts believe prediction markets’ encroachment isn’t enough to compel a state with a famously anti-gaming stance to change its views. Some industry observers believe that the rise of yes/no exchanges could motivate Texas lawmakers to strengthen their opposition to sports wagering.

In a new report, Eilers & Krejcik Gaming (EKG) says that simply because prediction market operators are generating revenue in Texas with none of it flowing to the state, that’s not enough for politicians there to rush to approve sports wagering.

EKG adds that increased coverage of issues such as the vulnerabilities of young men who are active bettors and the negative financial consequences of frequent wagering may weigh on the minds of Texas lawmakers, preventing them from approving legislation that would allow voters to weigh in on sports betting.

In Texas, Revenue Argument Falls Flat

Standard operating procedure by gaming companies in their appeals to politicians to approve sports betting is articulating revenue benefits for states.

That flies in smaller and mid-sized states, but although Texas doesn’t levy an income tax, it’s not starved for revenue. As EKG points out, unless Texas pursues a New York-style sports betting tax scheme (51% on gross gaming revenue), the potential revenue upside wouldn’t move the needle in a state with a fiscal 2026-27 budget of $338 billion.

To date, there’s been no talk of Texas politicians pushing for a 51% sports betting tax if that form of wagering is approved there.

“The prediction market debate gives OSB proponents a new argument for legalization, but it also gives opponents fresh ammunition,” adds EKG. “On balance, we see more downside than upside for Texas’ 2027 legalization push.”

Texas Has Cards to Play

Regarding prediction markets, Texas has alternatives and sports wagering proponents probably won’t like those choices because the options don’t lead to sports betting approval.

The state can enact its own prediction market regulations or wait for the U.S. Supreme Court to potentially strike down sports event contracts, which could happen over the next six or seven months.

“The argument that Texas should legalize OSB to compete with prediction markets depends on prediction markets retaining broad access to the state,” concludes EKG. “Lawmakers may instead seek to restrict sports prediction markets directly or, more likely, wait for the Supreme Court to rule before acting themselves.”