Prediction Markets' Growth Unlikely to Push Texas Toward Sports Betting Legalization

Texas has long been viewed as a potential goldmine for the online sports betting industry, yet the state remains one of the few major U.S. markets without legalized internet wagering. As prediction markets have gained traction in recent years, some observers speculated that their popularity might create momentum for sports betting approval. However, new research suggests the opposite may be true.

According to a report from Eilers & Krejcik Gaming (EKG), the rise of prediction market operators generating revenue in Texas without any proceeds flowing to state coffers is unlikely to compel lawmakers to abandon the state's famously anti-gaming stance. In fact, industry experts believe the prediction market debate could strengthen opposition to sports wagering legalization.

Texas lawmakers are expected to consider sports betting legislation again in 2027, marking the fifth attempt in eight legislative sessions. Yet the conditions favoring approval appear limited. EKG notes that prediction market growth actually provides opponents with fresh ammunition to argue against sports betting, potentially outweighing benefits cited by legalization proponents. The research firm concludes there is more downside than upside for Texas' 2027 legalization push.

A primary obstacle is the revenue argument that typically persuades smaller and mid-sized states to approve sports betting. Texas, which operates without a state income tax and maintains a fiscal 2026-27 budget of $338 billion, is not starved for revenue. Unless Texas pursued an aggressive tax structure similar to New York's 51% rate on gross gaming revenue, the financial upside would be negligible. To date, no Texas politicians have signaled interest in adopting such a high tax rate.

Beyond financial considerations, lawmakers may be influenced by increased public discussion surrounding the vulnerabilities of young men to betting addiction and the negative financial consequences of frequent wagering. These concerns could deter approval of legislation that would expand gambling access.

Crucially, Texas holds alternative options that could address the prediction market issue without legalizing sports betting. The state can enact its own prediction market regulations or wait for potential U.S. Supreme Court action on sports event contracts, a decision expected within six to seven months. Lawmakers may opt to restrict prediction market access directly rather than approve sports wagering.

EKG's analysis underscores a critical vulnerability in the legalization argument: it assumes prediction markets will retain broad access to Texas. If lawmakers restrict prediction market operators through regulation, the competitive pressure driving the sports betting case effectively disappears.

The Texas situation reflects the broader challenge facing sports betting legalization efforts in large, culturally conservative states. Unlike markets where tax revenue and job creation arguments resonated, Texas operates under different political calculus. The state's fiscal position, combined with entrenched opposition to gambling expansion and growing awareness of betting-related harms, creates a formidable barrier that prediction markets alone cannot overcome. For sports betting advocates seeking entry into this critical market, 2027 may prove another difficult year.