TLDR
- Texas Senate held a hearing on prediction markets after huge betting volume on NFL and college football games
- American Gaming Association urged Texas to sue prediction markets and treat them like illegal sports betting
- Kalshi argued federal regulation makes it safer than offshore betting sites
- Kalshi signed a first-of-its-kind partnership with the Tunica-Biloxi Tribe of Louisiana to launch a tribal prediction market app
- A federal appeals court ruled Kalshi’s sports contracts count as gambling under Indian gaming law when used on tribal land
Texas lawmakers spent over an hour this week debating whether prediction markets are just another form of sports betting. The hearing took place in the Texas Senate Committee on State Affairs.
It was called by State Senator Bryan Hughes. Lawmakers wanted to understand how federally regulated trading platforms fit alongside state gambling laws.
The timing was no accident. Betting volume in Texas has been high. A Dallas Cowboys and New York Giants game last Sunday drew more than $208 million in trading across US markets.
College football numbers were high too. A matchup between Ohio State and Texas on September 12 saw over 50.7 million contracts traded.
What happened at the hearing
Tres York from the American Gaming Association spoke first. He told lawmakers that a contract on the Cowboys game is no different from a bet placed at a sportsbook.
Robert DeNault, head of enforcement at Kalshi, disagreed. He said prediction markets regulated by the federal government offer more consumer protection than offshore betting sites.
“You can go the combative route and ban something that’s federally regulated,” DeNault said. “But what you’ll end up with is a bunch of customers in Texas just going offshore.”
Sports betting is illegal in Texas. Governor Greg Abbott and Lieutenant Governor Dan Patrick have both opposed past efforts to legalize it.
Attorney General Ken Paxton is currently running for US Senate against Democrat James Talarico. His replacement as attorney general will be decided in the same election.
State Senator Bob Hall compared prediction markets to gambling with different packaging. York recommended Texas pursue lawsuits in state court rather than federal court.
He also suggested Texas require prediction markets to block access statewide through geofencing technology.
Brianne Doura-Schawohl, a problem gambling researcher, also testified. She cited a study showing 52% of Gen Z respondents count sports betting and prediction markets as part of their long-term financial planning.
She raised concerns about a Kalshi competitor that lets minors over 17 link investment accounts to buy event contracts.
A new partnership and a court ruling
Outside the hearing, Kalshi made a separate announcement. It signed a deal with the Tunica-Biloxi Tribe of Louisiana to launch a tribal-owned prediction market app called SaltTrade Derivatives.
Tribal Chairman Marshall Pierite called it a chance for tribes to be owners and innovators rather than just participants.
The announcement came in the same week the Indian Gaming Association met with CFTC Chair Michael Selig. IGA Chair David Bean called the talks mostly unproductive.
Days later, the Ninth Circuit Court of Appeals reversed a lower court ruling in a case involving Kalshi and the Blue Lake Rancheria tribe.
The court found that Kalshi’s sports contracts count as gambling under federal Indian gaming law when accessed on tribal land.
Bean said the ruling confirms that federal Indian gaming law applies when sports wagering happens on tribal land.
Texas has not yet decided how it will regulate prediction markets going forward. Lawmakers are expected to revisit the issue after the November midterm elections, once races for governor, attorney general and US Senate are settled.
