Prediction Markets and Event Contracts | House State Affairs, 9.15.2026

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Texas Policy Research submitted the following written testimony to all members of the Texas House Committee on State Affairs ahead of its interim hearing.

• Committee: House Committee on State Affairs
• Hearing Date: September 15, 2026
• Context: 89th Legislature, Interim
• Subject: Prediction Markets and Event Contracts
• Position: Informational
• Texas Liberty Compact: Protect Free Speech & Digital Expression
• Submitted By: Jeramy Kitchen
• Entity: Texas Policy Research Action (TPRA)

The text below reproduces the testimony as submitted to the committee.
The submitted document linked above is the authoritative version.

Chairman King and Members of the Committee,

Thank you for the opportunity to provide comments regarding prediction markets and event contracts.

Texas should begin with a simple principle: competent adults should generally be free to make voluntary decisions, assume risk, and live with the consequences. Government's proper role is to establish neutral rules, enforce contracts, punish fraud and coercion, and protect individual rights. It should not criminalize peaceful conduct merely because officials consider it unwise or disfavored.

Prediction markets allow participants to buy and sell contracts based on whether an event will occur. They may be used for speculation, entertainment, hedging, research, or aggregating dispersed information into a publicly visible probability. Treating every event contract as indistinguishable from traditional gambling ignores these different purposes and risks regulating a developing financial instrument according to analogy rather than substance.

Texas should define its jurisdiction clearly and respect the federal framework governing designated contract markets. State policymakers may address conduct within Texas authority, but they should avoid duplicative or conflicting requirements for markets already regulated under federal commodities law. Regulatory uncertainty benefits neither consumers nor legitimate businesses.

Where government action is warranted, it should target demonstrable harms. Appropriate rules may address fraud, market manipulation, theft, deceptive marketing, misuse of material nonpublic information, improper handling of customer funds, participation by minors, and failures to honor contracts. Platforms should clearly disclose fees, settlement terms, custody arrangements, material risks, and the source used to determine an event's outcome.

Election and public-policy contracts deserve careful treatment, but concern about political markets does not justify a blanket prohibition. Such markets communicate information about public expectations and can contribute to political discussion. Restrictions should focus narrowly on conduct such as trading by candidates, government officials, contractors, or others possessing relevant nonpublic information; attempts to manipulate an underlying event; foreign interference; or deceptive claims about what market prices represent.

The Texas Liberty Compact calls for protecting free speech and digital expression. Although financial transactions may be regulated, lawmakers should recognize that prediction markets also generate and communicate information. The government should not suppress lawful political information or online expression without identifying a concrete harm and tailoring its response accordingly.

Adults already make consequential decisions involving investments, insurance, business ventures, and other forms of risk. Prediction markets should be governed by the same basic principles of personal responsibility, honest dealing, enforceable contracts, and neutral rules.

Texas should punish wrongdoing without confusing risk with victimization or regulation with prohibition. The proper question is not whether government approves of every contract, but whether adults are participating voluntarily under clear and honest terms.

Thank you for your consideration.

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Sources

• Prediction Markets; Public Interest Determinations, Proposed Rule, Commodity Futures Trading Commission, June 2026
• CFTC Issues Proposed Rule Regarding Prediction Markets, Congressional Research Service
• Texas eyes prediction market limits. The feds stand in the way., The Texas Tribune, May 2026
• Prediction Markets at a Crossroads: The Continued Jurisdictional Battle Over Event Contracts, Holland & Knight, February 2026
• Interim Charges, Texas House of Representatives, 89th Legislature
• The Wisdom of Crowds: An Intro to Prediction Markets, Cato Institute
• Banning Political Prediction Markets Would Be Unconstitutional, Bloomberg Law

Related TPR Work

• Texas's Lottery Problem Isn't Oversight. It's the Lottery Itself., January 2026
• The Push for Casino Gambling and Sports Betting in Texas: Key Legislation and Debate, September 2024
• Sports Betting Legislation Filed in Texas House, February 2025
• Written Testimony, Closing Gambling Loopholes | Senate State Affairs, 9.15.2026
• Written Testimony, Monitoring SB 3070 | Senate State Affairs, 9.14.2026

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