Texas targets crypto, gambling loopholes amid prediction market concerns

Prediction markets have gained a lot of attention in the past two years. Zooming in, the rise in these markets escalated in Q4 2024 as the U.S. election started to heat up. However, on the flip side, gambling also became an integral part of the prediction markets’ growth cycle.

These began to undermine people’s trust in the prediction market. Hence, to combat this problem and to regain trust, Dan Patrick, Lieutenant Governor of Texas, came up with some legislative changes. 

Under the State Affairs Committee category, Patrick underlined plans to close the gambling loopholes. In this push, the governor urged the lawmakers to, 

Study the sudden inundation of prediction market gambling and the exploitation of federal law to circumvent Texas gambling prohibitions by allowing users to place bets on the outcome of elections and other events.

The reason behind this crackdown?

Needless to say, this move is intended to protect and reinforce the regulatory oversight of the Commodity Futures Trading Commission (CFTC). Patrick believes that the prediction markets are now exploiting the CFTC regulations just to bypass Texas state gambling prohibitions.

With clear intentions to have fair elections and corruption-free sports in Texas, Patrick added,  

Make recommendations to ensure the integrity of Texas elections and Texas sports.

Echoing similar sentiments at the broader level, David Miller, enforcement director of CFTC, in his first public remark after joining, added, 

We are aware of the speculation about insider trading. We are watching.

This comes as the Google Trends data saw a drop in the “prediction market gambling” keyword as of writing.

As per the chart, the keyword had peaked to a Google Search score of 100 in early March. However, by the end of Q1 2026, the score stood at 35.

Besides prediction market reforms, Patrick has also come up with a plan to expand the future of crypto in Texas. He urged the lawmakers to:

Assess how the state’s financial regulatory agencies respond to emerging financial technologies and business models, while prioritizing the protection of consumers.

In fact, he also stressed the loopholes of scams surrounding the growing scale of crypto ATMs (virtual currency kiosks).

Lastly, the governor made a point to the lawmakers to look into Senate Bill 21 and how effectively it’s being implemented and whether it’s achieving its goal. For those unaware, Senate Bill 21 of Texas refers to the Texas Strategic Bitcoin Reserve bill implemented on the 20th of June, 2025. 

This coincided with Polymarket recently coming up with its updated rulebook across its DeFi platform and CFTC-regulated U.S. exchange. 

Final Summary

• Prediction markets are growing, but with this growth, gambling has taken center stage, raising credibility issues.
• David Patrick’s push for blockchain technology underlines how individual states are stepping up their crypto game as the U.S.-Iran war continues.