Polymarket Conflicting with Texas Sports Betting Stance

Polymarket already operates in a gray area. Apparently, though, it’s okay graying that area even further. And rest assured, this is going to catch the attention of Texas sports betting opponents.

For those not familiar with Polymarket, it offers prediction markets. These transactions are considered event-based contracts, similar to what you see on the stock exchange. Each contract is based on a yes-or-no style event. For example, a sports prediction market contract might be founded around the question of “Will the Dallas Cowboys win the NFC East?” If you think this sounds eerily similar to sports betting, you are not alone.

Plenty of officials and stakeholders in The Lone Star State see sports prediction markets as circumvention around current Texas sports betting laws. Sports betting, of course, is illegal in The Lone Star State. Yet, prediction-market providers are technically allowed to operate in every state. The reason: Their transactions do not pit the house against the customer. Instead, these event-based contracts are considered derivatives. The prices of an investment and the potential return on it are determined by the activity on a given event. They are not cobbled together by linemakers, and prediction-market operators do not receive a “vig.”

As such, prediction markets are viewed as derivatives. This subjects them to federal oversight rather than state regulation. That is why, after first being shut out of the United States, Polymarket has re-entered the country. And yes, this includes The Lone Star State.

To this point, we have heard very little about how Texas sports betting laws impact the view of companies such as Polymarket, Kalshi and Robinhood. On the one hand, The Lone Star State has not taken aggressive action against daily fantasy sports. They might follow the same blueprint here. Then again, Polymarket may have just pushed its luck.

Polymarket is About to More Closely Resemble Texas Sports Betting

According to multiple outlets, Polymarket is “exploring” the implementation of an “internal market-making team that would trade directly against users.” Critics are already claiming this would mirror illegal Texas sports betting by essentially pitting a “house” entity against users.

Polymarket, on the other hand, will argue this is more about generating revenue than impacting investments. It will also point toward industry peer Kalshi, which has its own internal market-making team.

Oliver Knight of Coindesk spoke with Harry Crane, a statistics professor at Rutgers University, about the duality of the matter. From what Mr. Crane says, it seems like he sides with the critics’ interpretation of this Polymarket move:

“‘The company should not want an in-house trading team to be too profitable, as that will create significant PR problems and possible legal issues,’ Crane said. ‘Just look at the class-action against Kalshi for doing the same.That lawsuit appears to be 100 percent frivolous, but the optics and PR are not positive.’ Beyond the legal risks, Crane argued the move undermines Polymarket’s strategic identity. ‘This diminishes Polymarket's opportunity to differentiate itself from the competition, and it dedicates resources and focus to something that is definitively not what got the company to this point.””

This last part is what relates directly to Texas sports betting. If Polymarket starts effectively creating their own lines, you’d think officials who have campaigned against legal sports gambling would take exception.

To be sure, it isn’t clear how much say state officials would have. For now, Polymarket and other prediction-market operators are protected by federal regulations. At the same time, if more and more states start bringing about lawsuits, you have to imagine the federal government will take notice. It might even feel pressure to act.

Polymarket is Already Having an Impact on Their Site’s Event-Based Contracts

Despite claiming it exists outside the bubble of online sports betting in the United States, Polymarket already appears to be impacting its own lines.

According to reporting from Awful Announcing, a number of fake insiders with “Polymarket badges” on their X profiles have reported inaccurate news. The most prominent example includes citing that Giannis Antetokounmpo wants to join the Los Angeles Lakers. (Note: Giannis is considering asking for a trade from the Milwaukee Bucks, but the Lakers have not been reported as a top potential destination.)

This practice poses obvious ethical questions. By putting out information about any player, coach or team, these insiders are directly impacting certain lines. The most obvious one in this instance would be the “Will Giannis go to the Lakers?” contract we can only assume was on the site. Having the lines on that transaction impacted by an affiliated insider is questionable enough. It’s outright inflammatory if we’re dealing with faux-insiders on the company’s payroll or partnerships list.

More information needs to be explored following this Awful Announcing report. But it’s tough to imagine Texas lawmakers not having something to say about it if Polymarket is already manipulating its own trading lines.

This Could Be a Case for Texas to Legalize Sports Wagering

As counterintuitive as this may seem, we could be witnessing the strongest case for legalized Texas sports betting yet.

Given the sheer number of Texas sports betting workarounds now in play, even staunch opponents have to be wondering if they could more effectively regulate the gambling market with actual legislation. Indeed, states do not currently have the power to excise companies like Kalshi, Polymarket and Robinhood from the market. But residents are theoretically much less likely to use these platforms if they have Texas sports betting access.

To be sure, we are merely projecting and speculating here. Perhaps this logic winds up missing the mark. It will be hard to know for sure anytime soon. The Texas legislature only meets in odd-numbered years, so there’s no formal round of discussions set to place in 2026.

All the same, if Polymarket and Kalshi continue to more closely mirror Texas sports betting circumvention, we have to imagine the state will inevitably take some form of action.

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