How Texas Could Get Sports Betting In A Roundabout Way

It’s no secret that sports betting in Texas is hard to come by. The state has strictly outlawed legal sports betting — only one of 11 states still with a ban.

This has pushed Texas bettors to popular offshore sportsbooks or even out of state in Louisiana. However, these bettors might get an easier option for sports betting — all from the comfort of Texas borders.

Get this, prediction markets could become the next big thing in Texas. As it stands, these are sort of legal across the country, even in states without regulated betting. Whether that legal loophole remains open is a story in itself, but allow us to take you into some shocking developments in this world that could make its way to the Lone Star State sooner rather than later.

If You Can’t Beat Them, Join Them

DraftKings is the number two sportsbook operator by market share. Despite that success, they’ve been feeling the heat from the rise of prediction markets like Kalshi and Polymarket, among others.

Maybe you’re reading this and thinking, “what the hell are prediction markets anyway?” Well, these platforms let users buy and sell “contracts” tied to real-world outcomes — politics, economic reports, weather forecasts, and yes, sports. If that sounds like betting, well, it pretty much is.

But…. and this is a big but, prediction markets aren’t regulated like sports betting. Operators like DraftKings have to get a license in every state to operate. Prediction markets? They work everywhere, without a license. Yes, that includes states like Texas and California, which are stiff with traditional “betting.” But again, these prediction markets aren’t treated the same.

Back to DraftKings, though. Reports are saying that they are trying to enter the prediction market. According to Front Office Sports, the company is in talks to acquire Railbird, a newly licensed and federally regulated prediction market exchange. The deal isn’t finalized yet, and no one’s saying what it might cost, but where there’s smoke, there’s fire — and this is probably the real thing.

Railbird was founded in 2021 by ex-Point72 analysts Miles Saffran and Edward Tian, and it just got a major green light from the feds. Last month, the Commodity Futures Trading Commission (CFTC) approved Railbird to operate as a “Designated Contract Market,” making it one of the rare prediction markets with federal oversight. That means it’ll work in Texas, whether this deal goes through or not.

DraftKings Sees Dollar Signs

The timing of this move is interesting. First of all, the federal approval is massive. With that, Railbird can now expand to all 50 states, which it says it plans to do. The company is well-strapped financially with the likes of SeatGeek and multiple VC firms funding it.

Not only that, but DraftKings just withdrew its own application for such a federal license in April. At the start of the year, the betting giant filed paperwork with the National Futures Association to launch “DraftKings Predict,” its own federally regulated prediction market. Now we know that they probably found it easier to buy an existing license and company than go through the process on their own. This allows them a “back door entrance” per se.

DraftKings isn’t alone in sniffing around this space either. The parent company of FanDuel, Flutter, is also interested in prediction markets. CEO Peter Jackson recently called the industry a “prime-the-pump opportunity” in states where sports betting isn’t yet legal. He would be right given that California and Texas are still two massive dominoes yet to fall. Opening up those markets to sort of legal sports betting would be monstrous business-wise.

Prediction Markets Are Booming Nationally

This industry doesn’t appear to be a flash in the pan. Take industry leader, Kalshi. They just raised a massive $185 million at a $2 billion valuation, only six months after diving into sports contracts. Before, they mostly operated in the politics and entertainment world. Now? Half of their top-traded markets are sports. CEO Tarek Mansour has said the cash will help them go even deeper into sports and add distribution partners like Robinhood, which already carries their products.

Kalshi and others have proven product-market fit. Of course, that could all go away with some law changes. In fact, gambling states like Nevada and New Jersey aren’t fans — both have issued cease-and-desist orders accusing Kalshi of running an unlicensed sportsbook under the guise of event trading. Kalshi’s fired back with lawsuits and has managed to keep operations alive in some states thanks to temporary court wins, but the legal fight is far from over.

That’s where Railbird — and potentially DraftKings — see a lane. Railbird isn’t actually live yet, but with CFTC approval locked in, it’s better positioned on the regulatory side than Kalshi. In their license announcement last month, Railbird said it’s about bringing capital markets tools to the everyday headlines. Translation: they’re trying to be the “grown-up” company of this space — and DraftKings might just want that credibility baked in.

Texans, you may have a new way into sports betting as early as this Fall when the Longhorns and Cowboys are back in action.