Tennessee regulator urges CFTC to ban sports prediction markets

Tennessee has become the latest state to raise concerns over the legality and oversight of prediction markets, urging the Commodity Futures Trading Commission (CFTC) to reconsider allowing such platforms to operate under federal regulation.

In a letter sent to the CFTC, the Tennessee Sports Wagering Council — the state’s regulator for sports betting — expressed strong opposition to sports event contracts currently being offered within the state by CFTC-regulated entities. The council argued that these contracts constitute illegal gambling under the Tennessee Sports Gaming Act.

“We are writing to express our concerns with the sports event contracts currently being offered in Tennessee by Commodity Futures Trading Commission-regulated entities,” reads the letter. “We believe that these sports event contracts are Wagers under the [Tennessee Sports Gaming Act] and are being offered in violation of Tennessee law and regulations."

Tennessee joins states including Illinois, Maryland, Montana, Nevada, New Jersey, Ohio, and Michigan in pushing back against prediction market platforms. Several of these states have already sent cease-and-desist letters to companies offering such services. 

While Tennessee has not gone as far as to send cease-and-desist letters to operators, the council’s letter urged the federal commission to respect Tennessee’s legal framework and remove sports contracts from the marketplace.

“As the Commission reviews these sports events contracts, we ask that you respect the policy decisions made by the Tennessee Legislature and not permit the offering of sports events contracts,” the council said.

Prediction markets allow users to buy contracts on sports outcomes — like betting on which team will win — but without using licensed sportsbooks. While prediction markets are legal in all 50 states under current CFTC oversight, only 39 states allow legal sports betting.

Regulators said these markets are skirting state laws, avoiding taxes, and leaving users without basic consumer protections.

“The Tennessee Legislature has put in place many requirements of its sports betting Licensees in order to protect those who choose to wager in our state,” the council claimed in the letter. “The CFTC-regulated entities currently offering these sports events contracts are not compliant with these protections (or many others) mandated by the Tennessee Legislature.”

Among the issues cited were practices not permitted by licensed sportsbooks, including wagers on injuries and penalties, college player prop bets, and live markets for college sports. 

The platforms also reportedly accept cryptocurrency and credit card deposits and lack safeguards such as self-exclusion programs, responsible gaming tools, and anti-money laundering protocols.

What comes next remains uncertain. In previous cases, companies like Kalshi, a prominent prediction market operator, have pushed back. Kalshi has taken legal action against states, including New Jersey and Nevada, after receiving cease-and-desist letters, arguing that its operations are federally regulated and thus exempt from state gambling laws.