Texas AG Paxton sits out 44-state challenge to federal prediction market rules
Texas Attorney General Ken Paxton did not join a July letter in which 44 states asserted authority to regulate prediction markets. Paxton has pursued strict gambling enforcement against fantasy sports and gaming operators in Texas, but has taken no action against Kalshi. Multiple sources tie his hands-off posture to donations from Kalshi and its CEO. Paxton has not publicly explained his decision. The federal rules governing the industry were not detailed in available coverage.
Kalshi now faces a machine of state attorneys general that no longer needs Texas to keep rolling. Nevada already stripped its federal shield, and Connecticut, Baltimore, and New Jersey filed parallel suits. Each new state emboldens the next, whether Paxton joins or not.
Kalshi's legal spend compounds across multiple time zones while its national sports market fragments. Traders hold positions whose legality shifts with geography. The donation story hands Kalshi's opponents a political cudgel they can wield in every future state hearing. Kalshi must now defend its business model and its ethics simultaneously.