Texas Prediction Markets Bill Proposes Higher Age, Limits on Contracts - DeFi Rate

The bill amends Texas commerce law to ban trading for people under 21 and introduces civil penalties for designated contract market (DCM) operators that allow such trades or violate the statute in other ways.

It also bans advertisements that depict or target individuals under the age of 21. DCM ads would have to state the minimum age and may not appear on the grounds of or in association with any primary or secondary schools.

The legislation would restrict event contracts connected to specific outcomes, including the results of criminal investigations, executions, civil lawsuits, deaths, assassination attempts, acts of terrorism, war, disease, and immigration events.

Political Context

The bill surfaces as current members of the Texas Senate have been charged with producing a study on prediction markets for that body. Significant change is forthcoming in both chambers.

When the Texas legislature reconvenes in 2027, Salman Bhojani will be part of the majority in the Texas House as a Democrat. Up to 90 of the 150 seats in the chamber could be held by Democrats, pending the final vote tally.

Part of the Texas Senate leadership for the new year is already clear. Vikki Goodwin, a Democrat, will replace current Lt. Gov. Dan Patrick. In Texas, the lieutenant governor serves as the president of the Senate.

While Republicans will retain a seven-seat majority in the Senate in the new term, Goodwin will control which bills reach the floor for a vote. That could mean that Bhojani's bill would at least come up for a vote in the upper chamber if the House passes it.

Potential for Legal Challenges

DCM operators and the United States Commodity Futures Trading Commission (CFTC) might challenge the presumed Texas prediction markets law on several grounds.

The CFTC and DCMs have been active on this issue in Illinois, Kentucky, and Minnesota. All three of those states have enacted statutes that apply specifically to prediction markets.

The CFTC has challenged them, arguing that federal laws preempt state regulation of DCMs and that it is the sole regulator. DCMs have sued, stating that the statutes put them in a position of trying to comply with opposing federal and state standards.

The difference in the age minimum could serve as an example, as CFTC rules allow people as young as 18 years old to trade on DCMs. The DCMs have added that federal regulations require them to provide the same access to traders across the country.

The CFTC has recently pushed that point, demanding that operators that have restricted access to traders in some states remove those restrictions.

Path to Law

With Democratic Gov.-Elect Gina Hinojosa set to start her first term in January, the Senate may be the biggest obstacle to enshrining Bhojani's bill. That enactment could also create new obstacles to its effectiveness.

Goodwin may still decline to bring the bill forward if she feels that the votes to pass the measure don't exist. The bill could undergo significant revisions before it would become law, though.

Those revisions may remove any potential conflicts with federal rules governing DCMs. However, it is fair to question what the point of the new statute would be in that case.

If nothing else, Bhojani's filing represents the ground floor for the conversation of prediction market regulation in Texas for 2027.