LUBBOCK, Texas (KCBD) – The Texas Senate Committee on State Affairs has been charged with protecting Texas elections and sports amid a boom in prediction market platforms. The conversation centers on whether participating in these markets counts as gambling.
The American Gaming Association wants Texas to force prediction markets to follow state gambling laws.
Robert DeNault, with legal counsel at Kalshi, said the platform offers users the opportunity to trade event contracts, also known as swaps. Users can purchase “yes” or “no” contracts premised on something potentially happening in the future.
DeNault said Kalshi does not operate as the “house” would with a casino. He said trading contracts are simply facilitated between two users.
“What we offer is a financial product that lets Texans engage in well regulated trading activity in a free and open market as well as manage real financial risk,” Denault said.
Tres York, with the American Gaming Association, disagreed.
“If you’re stringing together three different things to happen in a sporting event game, at the end of the day this is simply gambling on sports,” York said.
Gambling policy expert and lobbyist Brianne Doura-Schawohl told senators that to the end user, what the activity is called doesn’t matter.
“The brain doesn’t care whether you call it a DCM [Designated Contract Market] or a sportsbook, right? It’s about that experience, you’re putting something of value, you’re risking it, of the potential to get something of value, but you could also lose it,” Schawohl said.
York said businesses like Kalshi are ignoring the state’s ban on sports betting by concealing it under the guise of financial investments.
“Kalshi has their own trading arm that is separate from the exchange that often is on the other side of that bet. So, it may not be Brianne, it may be a multi-billion dollar Wall Street firm that is using AI and advanced information in order to get the better end of that bet” York said.
DeNault argued that providing liquidity to a market is not the same as operating a sportsbook. He also said regulations are safer than an outright ban.
“You can try to ban, you know whether it’s cryptocurrency, whether it’s perpetual futures, you can try to ban all these things, but users are going offshore and using them in a much less safe way. And so, it’s important for us to try to work together, I think, to create constructive solutions, not just combative ones in court,” DeNault said.
Schawohl raised concerns about a potential rise in gambling addictions and the consequences. A Common Sense Media report found at least a third of teenage boys gambled in the last year.
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