ARE PREDICTION MARKETS LEGAL IN TEXAS?

On this page · 4

1. The legal framework
2. Earlier court decisions
3. Taxes for Texans
4. How to start (5 minutes)

TL;DR: Texans can legally trade event contracts on Kalshi, Polymarket (via its CFTC-regulated US entity QCX), and Crypto.com Sports (minimum age 18 on each; we recommend 21+). All three are regulated as derivatives by the federal CFTC, not as gambling under Texas law. Traditional state-licensed sportsbooks remain illegal in Texas as of 2026.

Kalshi's status in Texas: Available (as of October 3, 2026). Details, court rulings and the change-log: Is Kalshi legal in Texas?

The legal framework

Prediction markets in the US are regulated under the Commodity Exchange Act by the Commodity Futures Trading Commission (CFTC). A licensed entity called a Designated Contract Market (DCM) can list "event contracts" — binary derivatives that pay out based on real-world outcomes.

The exchanges argue that because event contracts are federally regulated, federal law preempts state gambling statutes such as Texas Penal Code Chapter 47. For sports contracts the federal appeals courts are now split on that question (see "Where the courts stand" above); Texas has not tested it.

Earlier court decisions

In 2024 Kalshi won its dispute with the CFTC over election contracts in federal court in Washington, D.C., and the D.C. Circuit declined to pause that ruling in October 2024. That case was about elections, not sports. Several states have since acted against sports contracts, and those cases are the ones behind today's split between the appeals courts.

As of September 29, 2026, Texas has not moved against Kalshi or Polymarket.

Taxes for Texans

Texas has no state income tax, a real advantage for active traders; federal tax still applies to profits. The IRS hasn't issued guidance on how event contracts are classified, and professionals disagree (gambling income, ordinary income or capital gains, or Section 1256). Keep your platform statements and consult a tax professional.

How to start (5 minutes)

1. Pick a venue. Most Texans start with Kalshi.
2. Sign up with a US ID and a Texas address. Standard KYC.
3. Fund with ACH from any Texas bank, or debit card.
4. Browse markets — sports, weather, politics, economics.
5. Buy YES or NO between $0.01 and $0.99. Hold to resolution or sell early.

Trade on Kalshi (opens in a new tab) Trade on Polymarket US (opens in a new tab)

New to all this? Start with What is a prediction market? A plain-English guide for Texans.

This article is informational, not legal or tax advice. Laws and platform availability change — verify with the platform and a qualified professional before trading.

Frequently asked questions

Are prediction markets gambling under Texas law?

The exchanges treat event contracts as federally regulated derivatives and argue Texas Penal Code Chapter 47 doesn't apply. For sports contracts, federal appeals courts are split at the preliminary-injunction stage: the 3rd Circuit sided with the exchanges in April 2026, while the 9th Circuit (August 28, 2026) and 6th Circuit (September 25, 2026) found Kalshi unlikely to show federal law blocks state gambling laws. Three petitions are before the Supreme Court (Nos. 26-299, 26-338 and 26-344); none has been granted. Texas is in the 5th Circuit, which hasn't ruled. This isn't legal advice.

Has the State of Texas tried to ban Kalshi?

No. As of September 29, 2026, Texas hasn't sued Kalshi or ordered it to stop. Lt. Gov. Dan Patrick has asked state senators to study prediction markets ahead of the 2027 legislative session. Several other states have acted, and those cases are in the federal courts.

Do I need to be 18 or 21 to use Kalshi in Texas?

Kalshi and Polymarket accept users 18 and older; our editorial policy is 21+. Age rules can differ by platform and state, so check the sign-up screen.

How do I deposit money from a Texas bank?

Kalshi accepts ACH transfers, debit cards, and wire transfers from US banks including all major Texas banks. Polymarket US funds in US dollars inside its app. Crypto.com uses standard mobile payment methods.

Are winnings reported to the IRS?

Profits are taxable at the federal level (Texas has no state income tax) and should be reported even if you don't receive a form. Platforms issue some 1099s (Kalshi, for example, for interest, rewards and crypto transfers) and provide trade statements; the IRS hasn't issued guidance on how event contracts are classified.