Texas Lt. Governor Wants to Ban Prediction Markets — Here’s Why the Feds Are Blocking Him

Texas Lt. Governor Dan Patrick wants to shut down what he calls a “gambling loophole” that has allowed online prediction markets to operate freely in a state where sports betting and casinos remain illegal. But standing between Patrick and any state-level crackdown is a determined federal agency — the Commodity Futures Trading Commission — along with the Trump administration, which has made clear that it believes prediction market oversight belongs exclusively at the federal level. For Texans who use or are curious about platforms like Kalshi and Polymarket, understanding this standoff is essential to knowing what comes next.

What Dan Patrick Has Actually Done

In March 2026, Patrick directed the Texas Senate State Affairs Committee to study what he characterized as “the sudden inundation of prediction market gambling” and to prepare recommendations for the 2027 legislative session. As presiding officer of the Texas Senate, Patrick controls which legislation reaches the floor for a vote, making his attention to an issue meaningful even when no bill has yet been introduced.

Patrick’s directive called on senators to examine how federal law has been exploited to “circumvent Texas gambling prohibitions” and to develop recommendations ensuring that prediction markets do not endanger the integrity of Texas elections and Texas sports. The framing was pointed: Patrick did not describe prediction markets as financial products but as gambling products operating through a loophole. The State Affairs Committee had no meetings scheduled as of early May 2026, and any legislation could not come until the 2027 session at the earliest.

Patrick has long been one of the most consistent opponents of expanding gambling in Texas. He blocked a House-passed sports betting bill from reaching a Senate vote in 2023 and again in 2025, citing insufficient Republican support in the upper chamber. His opposition to prediction markets fits a consistent pattern, even as the legal and political dynamics around them are considerably more complicated than traditional sports betting legislation.

Why Federal Law Is Blocking the State

Prediction market operators like Kalshi argue — and multiple federal courts have agreed, at least in part — that state gambling laws simply do not apply to their platforms. The reason is the Commodity Exchange Act, which Congress passed in the 1930s and substantially expanded through the Dodd-Frank Act of 2010. Under that law, the CFTC has exclusive jurisdiction over swaps and futures contracts traded on federally licensed exchanges known as designated contract markets.

Kalshi operates a CFTC-registered designated contract market. It argues that its sports event contracts — essentially yes/no bets on game outcomes — are swaps subject exclusively to CFTC oversight, and that state gambling regulators cannot require it to obtain a state license. The U.S. Court of Appeals for the Third Circuit agreed with Kalshi in a landmark April 7 ruling, holding 2-1 that the Commodity Exchange Act preempts New Jersey’s attempt to enforce state gambling law against the platform.

The Trump administration’s CFTC, led by Chairman Michael Selig — who took office in December 2025 as the agency’s sole commissioner — has made federal preemption a policy priority. The CFTC withdrew a proposed rule that would have banned sports and political prediction markets. It has also filed suit against multiple states, including Wisconsin and Arizona, to block them from taking enforcement action against prediction market operators. The message from Washington has been consistent: the federal government, not the states, regulates these platforms.

Texas Is Conspicuously Absent From the Fight

While roughly 15 states have sued, investigated, or sent cease-and-desist orders to prediction market operators, Texas has taken no formal enforcement action. Texas Attorney General Ken Paxton did not sign a March 2026 letter from 39 state attorneys general arguing that the CFTC does not have sole authority to regulate prediction markets. He also declined to sign a similar brief joined by 37 states the following month. In August 2025, Paxton was one of only four state attorneys general who chose not to sign a letter urging the federal government to crack down on offshore gambling. His office has not commented publicly on whether Texas gambling laws apply to prediction markets.

The absence is notable given Texas’s traditional firmness on gambling restrictions. Analysts point to several possible explanations: political ties between Texas Republicans and the Trump administration, which is broadly supportive of prediction markets; the fact that Donald Trump Jr. is an adviser to both Kalshi and Polymarket; and the reality that Truth Social, the platform created by President Trump, announced plans in October 2025 to launch its own prediction market. For a Republican attorney general in a state closely aligned with Trump, challenging CFTC-regulated platforms that the administration backs would carry obvious political risk.

What Texas Could Theoretically Do

Even with federal preemption as a barrier, legal experts and gambling opponents have outlined several avenues Texas could potentially pursue without directly challenging the CFTC’s jurisdiction. One option involves scrutinizing prediction market advertising. Federal regulations allow prediction markets to accept users as young as 18, while most states restrict gambling to those 21 and older. Critics point out that some platform ads are largely indistinguishable from sportsbook advertising and may target younger audiences.

Kalshi and Polymarket both ran Instagram ads in Texas that explicitly described their services as “betting,” a practice reported on by the Texas Tribune and Event Horizon. Those ads were removed after coverage, but new advertising continues to frame the platforms as alternatives to traditional sportsbooks. Texas lawmakers could also request or subpoena information from operators to understand the scale of activity among Texas users, a tool the Senate State Affairs Committee has used effectively in other contexts.

Another approach being discussed in several states is banning government officials and employees from using prediction markets when they possess non-public information that could influence contract outcomes. Four governors have already issued such executive orders, stopping short of outright bans on the markets themselves but drawing a line around insider use.

The Bigger Picture for Texas Bettors

For Texans who have been using Kalshi, Polymarket, or the prediction market products launched by FanDuel and DraftKings — both of which now redirect Texas users to their CFTC-regulated prediction platforms instead of traditional sportsbooks — the near-term legal landscape looks relatively stable. No Texas state agency has issued guidance or enforcement action against any prediction market operator. The CFTC under Selig has signaled it would push back hard against any state that tried to move against federally licensed platforms.

The longer-term picture is murkier. Three federal circuit courts are actively reviewing disputes between prediction market operators and states. If the Fourth Circuit rules against Kalshi in the Maryland case and the Ninth Circuit rules against it in the Nevada case, a circuit split with the Third Circuit would almost certainly trigger U.S. Supreme Court review. Whatever the Supreme Court ultimately decides would bind Texas as well. Until that happens, prediction markets remain fully operational in Texas with no enforcement impediment from any state authority.

Residents in other states weighing their sports betting options face a similarly shifting landscape as courts continue to sort out the state versus federal jurisdiction question. For now, Dan Patrick’s committee charge is likely to remain a study item — important as a signal of future intent, but constrained by federal law and political realities until the courts provide clearer answers.