California and Texas have long been seen as key players in the US online sports betting industry. These populous states have yet to legalize sportsbooks, but prediction markets are operating within their borders, sparking hopes that they may consider legalizing online sports wagering in the future.
However, the outlook for Texas is uncertain. Despite considerations for sports betting legislation happening in 2027, some experts believe that the presence of prediction markets might not be enough to sway the traditionally anti-gaming state. In fact, some believe that the introduction of yes/no exchanges could reinforce Texas lawmakers’ opposition to sports wagering.
According to a report by Eilers & Krejcik Gaming (EKG), the current revenue generation by prediction market operators in Texas is not a strong enough argument to prompt policymakers in the state to rush into legalizing sports wagering.
“We see limited evidence this argument will sway lawmakers who have historically opposed gambling expansion. Indeed, the prediction market debate could have the opposite effect,” the research firm stated.
EKG also highlights that concerns about the impact of frequent wagering on young men and the financial risks associated with it may deter Texas lawmakers from passing legislation to allow for sports betting.
In Texas, Revenue Argument Falls Flat
Gaming companies often emphasize revenue benefits when advocating for sports betting approval. However, this argument may not hold as much weight in Texas, which has a significant budget and does not rely heavily on income tax revenue. EKG points out that unless Texas adopts a high sports betting tax rate similar to New York’s (51% on gross gaming revenue), the potential revenue gains would be minimal in a state with a large budget.
Currently, there have been no discussions about implementing such a high tax rate on sports betting in Texas.
“The prediction market debate provides a new argument for sports betting legalization in Texas, but it also gives opponents more reasons to resist,” EKG added. “Overall, we see more challenges than opportunities for Texas to legalize sports betting in 2027.”
Texas Has Cards to Play
Despite the presence of prediction markets, Texas has other options, none of which necessarily lead to the approval of sports wagering.
The state could establish its own regulations for prediction markets or wait for a potential Supreme Court decision that could impact sports event contracts in the near future.
“The argument for legalizing OSB in Texas to compete with prediction markets depends on the continued access of these markets in the state,” EKG concluded. “Lawmakers may instead choose to restrict sports prediction markets directly or wait for the Supreme Court to make a ruling before taking action themselves.”