It's Watson who is refusing to play for Houston, not the other way around at least according to Watson but my understanding is that he's on the roster so they could certainly say he's going to start and force Watson's hand, not sure they want to do that.
He doesn't want to be there but the call to bench him is all Houston. If he refused to play, they would be able to not pay him but he showed up to camp and will play if asked.
He won't play until he is traded because if they played him and he got hurt, that's basically the death of any trade better than a 3rd rounder for him.