Texas Bill Imposes Age Minimum, Introduces Restrictions for Event Contract Trading

Democrats will have more power in Austin in 2027, and one member of that caucus in the state House of Representatives is wasting no time in trying to make prediction market legislation part of the agenda. Texas Rep. Salman Bhojani has pre-filed a bill addressing event contract trading.

The text of the proposal conflicts with existing federal regulations for such trading in several ways, including a minimum age of 21. Court challenges could be inevitable for the legislation should it pass, but that may also hinge on the content of an enshrined version.

Bhojani files bill aimed at prediction market trading

Bhojani's H.B. 598 amends Texas commerce law to ban trading for people under the age of 21. It also introduces civil penalties for designated contract market (DCM) operators that allow such trades or violate the presumed statute in other ways.

Those other ways include contracts connected to listed events. The restricted events would include:

• The results of a criminal investigation

• Executions

• Outcomes of civil lawsuits

• Deaths of individuals

• Assassination attempts

• Acts of terrorism

• War

• Disease

• Immigration events

The bill also bans advertisements depicting or targeted at individuals under the age of 21. DCM ads would also have to state the age minimum and may not be on the grounds of or in association with any primary or secondary schools.

This bill surfaces as current members of the Texas Senate have been charged with producing a study on prediction markets for that body. Significant change is forthcoming in that chamber and the one that Bhojani is a part of.

New leadership in the Texas House and Senate incoming

When the Texas legislature reconvenes in 2027, Bhojani will be part of the majority in the Texas House as a Democrat. Up to 90 of the 150 seats in the chamber could be held by Democrats pending continuing vote tallying.

Part of the leadership of the Texas Senate in the new year is already clear. Vikki Goodwin, a Democrat, will replace current Lt. Gov. Dan Patrick. In Texas, the lieutenant governor serves as the president of the Senate.

While Republicans will retain a seven-seat majority in the Senate in the new term, Goodwin will hold power over which bills reach the floor for a vote. That could mean that Bhojani's bill would at least come up for a vote in the upper chamber if the House passes it.

That is no assurance it would pass in the Senate, naturally. Goodwin may still decline to bring the bill forward if she feels that the votes to pass the measure don't exist.

With Democratic Gov.-Elect Gina Hinojosa set to start her first term in January, the Senate may be the biggest obstacle to getting Bhojani's bill enshrined. That enactment could present new obstacles to its effectiveness, though.

Bill ripe for legal challenges upon potential passage

DCM operators and the United States Commodity Futures Trading Commission (CFTC) might challenge the presumed Texas prediction markets law on several grounds. The CFTC and DCMs have been active on this issue in Illinois, Kentucky, and Minnesota.

All three of those states have enacted statutes that apply specifically to prediction markets. The CFTC has challenged them with arguments that federal laws preempt state regulation of DCMs and make itself the sole regulator.

DCMs have sued stating that the statutes put them in a position of trying to comply with opposing federal and state standards. The difference in the age minimum could serve as an example, as CFTC rules allow people as young as 18 years old to trade on DCMs.

The DCMs have added that federal regulations require them to provide the same access to traders across the country. The CFTC has recently pushed that point, demanding that operators that have restricted access to traders in some states remove those restrictions.

Bhojani's bill could undergo significant revisions before it would become law, though. Those revisions may remove any potential conflicts with federal rules governing DCMs.

However, it's fair to question in that case what the point of the new statute would be. If nothing else, Bhojani's filing represents the ground floor for the conversation of prediction market regulation in Texas for 2027.