The Tennessee Sports Wagering Council (SWC) has formally requested that the Commodity Futures Trading Commission (CFTC) refrain from permitting the operation of sports event prediction markets in the state.
The appeal, submitted via a letter signed by SWC Executive Director Mary Beth Thomas, comes amid intensifying legal and regulatory scrutiny of sports-based prediction markets, available on platforms such as Kalshi and Robinhood across the US.
Tennessee’s letter lacks the legal authority of cease-and-desist orders previously issued by gaming regulators in Nevada, New Jersey, Ohio, Maryland, and Illinois.
However, it underscores mounting concern over the emergence of sports event contracts offered by the platforms.
The SWC submitted the letter to be considered in the CFTC’s upcoming roundtable on 30 April, which aims to assess the legal and regulatory framework surrounding such contracts.
The letter outlines 13 alleged violations of Tennessee state laws and regulations that would result from allowing the contracts.
Central to the regulator’s argument is the assertion that accepting money risked on the outcome of a sporting event without a valid license issued by the SWC violates the Tennessee Sports Gaming Act.
The SWC emphasised that the licensing regime was designed to ensure that all sports wagering within the state adheres to strict regulatory standards and consumer protections.
The letter further details several regulatory measures that Tennessee has implemented for its licensed sports betting operators.
These include prohibiting those under the age of 21 from placing wagers and a requirement for the creation and maintenance of self-exclusion lists.
It also includes restrictions on the use of credit cards and cryptocurrency for funding accounts and a ban on the use of kiosks for account access or creation.
Additionally, Tennessee enforces anti-money laundering protocols and explicitly prohibits wagers on injuries, penalties, or individual actions of college athletes, including in-game proposition bets involving collegiate teams.
CFTC and Tennessee out of step on regulations
According to the SWC, platforms regulated by the CFTC that offer sports-related event contracts do not align with these consumer protections and regulatory measures.
The broader legal battle over the nature of sports prediction markets is also intensifying at the federal level. The SWC’s concerns echo those raised in ongoing legal disputes in Nevada and New Jersey.
Kalshi, one of the most prominent platforms in this space, recently secured a preliminary injunction and temporary restraining order against the Nevada Gaming Control Board.
In parallel, the New Jersey Division of Gaming Enforcement is scheduled to file its opposition to Kalshi’s operations in federal court by the end of this week.
According to legal analyst and gaming attorney Daniel Wallach, complicating the matter further is the possibility that Kalshi’s contracts may run afoul of the federal Wire Act.
Wallach pointed out in an article for Forbes that the law prohibits entities involved in the business of betting or wagering from using wire communication facilities to transmit bets or wagers across state lines on any sporting event or contest.
Kalshi’s model, which allows users across the country to trade on the outcomes of sporting events, may fall squarely within the scope of this prohibition, which dates back to 1961.
In a recent legal filing, Kalshi’s head of markets, Xavier Sottile, stated that the company does not restrict its users based on geographic location.
In addition, individuals entering into contracts on either side of a trade with Kalshi and similar platforms are frequently located in different states.
The federal court in Nevada noted this interstate aspect in its decision granting Kalshi’s temporary legal protection.
Wire Act interpretation may become central argument
Courts have previously interpreted the Wire Act’s language broadly, applying it not just to traditional bookmakers but also to entities engaged in the business of facilitating wagers — such as exchanges.
For example, as Wallach highlighted in his article, in United States v. Corrar, a federal district court in Georgia emphasised that the inclusion of the word “business” in the Wire Act denotes a broader set of activities than the mere receipt of bets.
The court argued that if Congress had only intended to criminalise bookmaking, the language of the law would have been limited to the direct acceptance of wagers.
Instead, the inclusion of broader terminology suggests an intent to regulate a wider array of betting-related enterprises.
The upcoming CFTC roundtable is expected to further clarify the agency’s stance on the legality and regulatory oversight of prediction markets tied to sports outcomes.
However, given the complex interplay between state regulations, federal law, and evolving market practices, the path forward remains uncertain.
Tennessee’s letter adds yet another dimension to a contentious and rapidly developing legal landscape that could reshape the future of sports wagering in the US.