- A federal appeals court sided with Kalshi in April, treating its sports contracts as federally regulated swaps that override state gambling bans, and judges in several other states have paused enforcement.
- Dan Patrick told senators to shut the loophole, but the CFTC and the Trump-era Justice Department are backing the platforms, leaving Texas with little leverage to act.
- Every bill to legalize Texas sports betting died in the 2025 session, and lawmakers cannot revisit it until 2027.
Austin – federally regulated prediction-market platform has continued to accept sports wagers from Texas residents despite a cease-and-desist letter from Texas Attorney General Ken Paxton, in a federal-state preemption fight that has effectively legalized online sports betting in a state whose Legislature has rejected every attempt to authorize it for two decades. Kalshi, regulated by the U.S. Commodity Futures Trading Commission as a Designated Contract Market under the Commodity Exchange Act, began offering sports-related “event contracts” on Jan. 24, 2025, and has continued to operate in Texas through May 2026.
The Texas sports betting loophole that Kalshi has exploited is straightforward in concept. Federal law gives the CFTC exclusive jurisdiction over derivatives traded on designated exchanges. Kalshi argues, and federal courts have so far agreed, that its event contracts are derivatives, not gambling, and that state gambling laws are preempted. Lt. Gov. Dan Patrick directed Texas senators in March 2026 to identify ways to close the loophole. He cannot. The CFTC and the U.S. Department of Justice under the Trump administration have actively sued or supported challenges to states that have tried to enforce against Kalshi.
Kalshi’s business model is based on “yes” or “no” contracts priced between 1 and 99 cents, with each price corresponding to the market’s estimate of the probability that a given outcome will occur. If the outcome happens, the contract pays $1. If not, it pays nothing. Most national prediction markets, including Kalshi and competitors Robinhood Derivatives and Crypto.com, now offer contracts on the outcomes of NFL, NBA, NHL, college football, and college basketball games. According to investment research platform Artemis, sports outcomes represent 80 to 90 percent of Kalshi’s monthly trading volume. CEO Tarek Mansour stated publicly that the platform handled more than $441 million in trade volume in the four days after the 2025 NFL season began.
Texas Attorney General Ken Paxton sent Kalshi a cease-and-desist letter in 2025. Kalshi acknowledged receipt and continued operating. The platform geofences users, requires identity verification, and limits access to users 18 and older. As of May 2026, Texas residents can open Kalshi accounts, deposit a minimum of $1, and place wagers on the outcomes of sporting events involving Texas teams, including the Houston Texans, Dallas Cowboys, Dallas Mavericks, San Antonio Spurs, and Houston Astros, along with contracts on the University of Texas Longhorns and other state college programs.
Federal courts have blocked most state enforcement against Kalshi so far. On April 6, 2026, the U.S. Court of Appeals for the Third Circuit affirmed a preliminary injunction barring New Jersey from enforcing its gambling laws against Kalshi’s sports contracts. The Third Circuit held that Kalshi was likely to succeed on its argument that the Commodity Exchange Act preempts applicable state law and that its sports event contracts are swaps traded on a CFTC-licensed exchange subject to exclusive federal jurisdiction. Federal courts in Tennessee, Ohio, Connecticut, and New York have also paused state enforcement actions. Maryland produced an outlier ruling more favorable to states. Paxton’s office has not announced any plan to litigate against Kalshi separately from the broader multi-state pattern.
The Texas Legislature considered five constitutional amendments to legalize Texas sportsbooks and casino gaming during the 2025 session: HJR 134, HJR 137, SJR 16, SJR 65, and SJR 82. All five died in committee. Patrick declined to refer the Senate measures to a committee for a floor vote. Patrick said publicly in December 2025 that he is “simply not there yet” on the question of legalizing casinos and sports betting. The Texas Legislature does not convene in even-numbered years, so the next opportunity for sports-betting legislation in Texas is the 2027 regular session.
On May 1, 2026, the Texas Tribune reported that Kalshi had taken enforcement action against Zeke Enriquez, who finished 11th in the Republican primary for Texas’s 21st Congressional District, for purchasing less than $100 in event contracts tied to his own primary race. Kalshi fined Enriquez $784 and banned him from the exchange for five years. The episode illustrated both the breadth of contracts available to Texas residents, including bets on races in their own backyards, and the limits of Kalshi’s self-policing. A federal candidate could purchase contracts on his own race without the platform detecting it until after the fact.
The National Conference of State Legislatures, which represents Texas lawmakers, submitted a comment to the CFTC in April 2026 urging the agency to place sports event contracts under state gambling laws. The CFTC, under Chairman Michael Selig, who was confirmed by the U.S. Senate in December 2025, announced in January 2026 that the agency would proceed with prediction-markets rulemaking but has signaled a permissive posture. The Trump administration has actively litigated to preserve federal exclusivity in the area.
The practical effect for Texas is that the state’s two-decade legislative refusal to authorize sports betting has been overtaken by federal regulatory developments that the state has no authority to override. The gambling sites in Texas that operate today include one that no Texas regulator licenses and that no Texas regulator has shut down. A Texan who wants to bet on an Astros game can. A Texan who wanted to bet on the Republican primary for Texas attorney general could. The lieutenant governor wants to close the loophole. He does not have the power to do so.