Football season brings more than just touchdowns and tailgates to Texas these days. It brings a flood of betting ads that might surprise anyone who knows the Lone Star State’s strict stance against gambling. While traditional sports betting remains illegal in Texas, a fascinating workaround is taking shape through daily fantasy sports and prediction markets that are capitalizing on federal loopholes.
How Texans Are Finding Ways to Bet Despite the Ban
The moment NCAA College Football kicked off on August 23 and the NFL started September 4, Texas residents found themselves bombarded with gambling advertisements. But here’s the twist: many of these ads claim that betting on football games is perfectly legal in Texas right now.
Polymarket has been particularly bold, stating outright that “football trading is now legal” in Texas. Meanwhile, Kalshi’s Instagram campaigns feature messages like “I found a way to bet on the NFL even though we live in Texas”. These aren’t empty promises – they’re capitalizing on a genuine regulatory gray area that lets Texans place money on sports outcomes without technically breaking state law.
The secret lies in how these platforms structure their operations. Daily fantasy sports platforms and prediction markets operate under federal oversight rather than state gambling laws. Prediction markets fall under the Commodity Futures Trading Commission’s jurisdiction as financial transactions, while DFS games get classified as skill-based contests rather than pure gambling.
The Massive Sports Betting Industry That Texas Is Missing Out On
The numbers behind the sports betting boom are staggering. The global sports betting market reached $108.9 billion in 2024 and is projected to hit $198.5 billion by 2030, growing at roughly 10% annually. In the United States alone, legal sportsbooks handled nearly $150 billion in 2024, generating $13.7 billion in revenue.
Texas, as the second-largest state by population, represents one of the biggest untapped markets. Industry analysts estimate that California leads unregulated markets with $8.5 billion in potential revenue, followed by Texas at $5.3 billion. These figures explain why betting companies are so aggressive in targeting Texas residents through alternative channels.
The state’s professional sports teams aren’t sitting idly by either. A coalition including the Dallas Cowboys, Texas Rangers, Dallas Mavericks, Dallas Stars, and FC Dallas has actively pushed for legalization legislation that would require operators to partner with teams or horse tracks. Their proposed bill would impose a $500,000 application fee, $50,000 retail operating licenses, and a 10% tax on gross gaming revenue.
Governor Abbott’s Changing Tune on Sports Betting
The political landscape around Texas sports betting has shifted dramatically. Governor Greg Abbott, once silent on the issue, publicly endorsed legal sports betting in 2025, stating on a podcast that he knows Texans are likely betting on sports anyway and would work to bring legal wagering to Texas if the right legislation emerged.
This represents a significant political opening, especially since multiple bills have been pre-filed for the 2025 legislative session. House Joint Resolution 134, sponsored by Rep. Sam Harless, proposes a constitutional amendment to legalize wagering on certain sporting events. Similarly, Rep. Charlie Geren submitted HJR 137 to regulate sports wagering through general laws.
However, challenges remain. Lieutenant Governor Dan Patrick’s decision to seek another four-year term has cast doubt on legalization prospects, given his reported opposition to expanded gambling. The requirement for a constitutional referendum means any legalization effort needs significant legislative momentum and voter approval.
The Prediction Markets Gold Rush
Prediction markets have exploded into a multi-billion dollar phenomenon, with Kalshi and Polymarket leading the charge. Kalshi’s revenue skyrocketed from $1.8 million in 2023 to $24 million in 2024 – a remarkable 1,220% increase. The platform handled $1.97 billion in trading volume in 2024, with the presidential election generating $1 billion in volume on Election Night alone.
Kalshi operates on a maker-taker fee structure, charging transaction fees ranging from 0.07% to 7% depending on contract probability. Lower-probability bets face higher fees, with an 80% probability contract incurring a 1.4% fee while a 20% probability bet carries a 5.6% fee. The platform’s average trading fee sits around 0.8%.
Sports betting has become a major revenue driver for Kalshi. In 2024, sports-related trading generated over $966 million, and CEO Tarek Mansour reported $441 million in trades within just four days of the NFL season starting. The platform expanded into single-game wagers in 2025, though initial volumes were modest at $2.4 million for NBA Play-In games.
Polymarket, operating as a decentralized platform, has taken a different approach. The company raised over $2 billion in funding led by Peter Thiel’s Founders Fund, reaching a $10 billion valuation. Monthly trading volume hit $10 billion in August 2024, more than double the previous year. Despite being geo-blocked from U.S. users, Polymarket’s acquisition of QCX, a Florida-based derivatives exchange, has cleared regulatory hurdles for compliant U.S. operations.
Daily Fantasy Sports: The Established Alternative
While prediction markets grab headlines, daily fantasy sports have been quietly serving Texas residents for over a decade. DraftKings and FanDuel dominate this space, controlling more than 90% of the market. Combined, these two companies account for approximately 95% of daily fantasy sports market share.
In Texas, DFS operates in a legal gray area. Attorney General Ken Paxton issued a nonbinding opinion in 2016 stating that daily fantasy sports likely constitute illegal gambling, but enforcement has been virtually nonexistent. FanDuel briefly exited Texas following this opinion but returned in August 2018, and both major platforms have operated openly since then without significant legal challenges.
The platforms emphasize the skill-based nature of their contests to distinguish themselves from gambling. Users create lineups of athletes and compete based on statistical performance rather than simple win-loss outcomes. This peer-to-peer model means players compete against each other rather than against the house, which helps support their classification as skill-based games.
Texas DFS sites accept players 18 and older, and the lack of regulatory action has created a comfortable status quo. Multiple legislative attempts to formally legalize and regulate DFS have failed, including bills in 2017, 2019, and 2021. The most promising effort, HB 2303 in 2019, passed the House 116-26 but died in the Senate.
The Marketing War for Texas Eyeballs
The advertising blitz targeting Texas residents reflects massive industry spending on customer acquisition. The top four gambling advertisers – BetMGM, FanDuel, DraftKings, and PrizePicks – contributed 60% of gambling-related advertising expenses at Super Bowl 2024. However, overall sports betting advertising has actually declined significantly from its peak.
Sports betting TV advertising volume fell 44% from 2021 to 2024, with a 17% decrease in 2024 alone. Total advertising spending on sports betting dropped $210 million in 2023 compared to 2022, marking a 15% reduction. Despite this decline, sportsbooks still spent approximately $666 million on advertising in 2024.
Interestingly, sports betting accounts for only 0.4% of total TV advertising volume, remaining lower than alcohol advertising at 0.5%. For every sports betting commercial, there are more than four telecom ads and 38 pharmaceutical commercials. The concentration of gambling ads during sports programming creates the perception of saturation, even though the actual volume is relatively modest compared to other industries.
The Persistent Offshore Challenge
Despite the growth of legal alternatives, offshore sportsbooks remain a significant factor in Texas. Industry research suggests that illegal offshore platforms and bookies handle approximately $84 billion annually nationwide, retaining about $5 billion after paying winning bets. In states without legal sports betting, including Texas, offshore usage is particularly high.
Bovada dominates the offshore market, ranking number one in Florida and maintaining strong presence in Texas, California, Ohio, Illinois, and Massachusetts. The platform’s accessibility and broad betting options make it attractive despite its unregulated status. Research indicates that at least 277 offshore brands operate in the U.S., with over 65% year-over-year growth in some markets.
The average bet sizes vary significantly across platforms, highlighting different user behaviors. Bookies average $142 per wager, offshore sportsbooks $56, and regulated sportsbooks $44. This suggests that traditional bookies serve higher-stakes players, while regulated platforms cater more to casual bettors.
Remarkably, even in states with legal sports betting, 33.9% of bettors still maintain accounts with offshore sportsbooks. This persistent offshore usage reflects advantages like relative anonymity, credit betting, and higher wagering limits that regulated platforms cannot match due to compliance requirements.
Federal vs State: The Regulatory Chess Match
The clash between federal and state oversight creates the regulatory environment that allows prediction markets and DFS to operate in Texas. Gregory Gemignani, a gaming law professor at UNLV, notes that these alternatives are “pretty much identical” to traditional wagering despite operator claims otherwise.
The federal Wire Act traditionally prohibits interstate wagering on sporting events, but prediction markets’ classification as CFTC-regulated financial instruments creates an unprecedented situation. States like New Jersey and Nevada have sent cease-and-desist letters to Kalshi, arguing the platform illegally offers sports betting without following state law. Some states have escalated to federal lawsuits, creating a complex legal landscape.
Massachusetts recently filed a state-level challenge against Kalshi, providing a potential template for other states wanting to stop sports betting via prediction markets. This represents the first time a state has gone on the offensive rather than waiting to be sued by prediction market operators.
The poor enforcement of existing laws has contributed to the growth of these alternatives. As Gemignani observed, “if you’re not going to enforce the laws, then people are going to ignore them”. Texas Attorney General Ken Paxton’s office issued opinions against DFS but has done little to actually enforce those interpretations.
Where This All Leads
The current situation in Texas represents a fascinating case study in regulatory arbitrage. While traditional sports betting remains illegal, Texans have unprecedented access to betting-like activities through federally regulated alternatives. The question isn’t whether Texans are betting on sports – they clearly are. The question is whether the state will eventually embrace regulation and taxation of this activity or continue to let federal loopholes dominate the market. Observers are also unclear about how other kinds of platforms will be regulated, such as online no-KYC casinos.
Rep. César Blanco has emphasized the need for clearer regulations that would provide better player protection and curb illegal offshore betting. The 2025 legislative session will be crucial, especially with Governor Abbott’s newfound support for legalization.
The sports betting industry’s explosive growth, the success of prediction markets and DFS platforms, and the persistent appeal of offshore options all point to massive consumer demand. Texas faces a choice: continue allowing this activity to operate in regulatory gray areas while missing out on tax revenue and consumer protections, or join the 38 states that have embraced legal sports betting and all the economic benefits that come with it.
