Sports contracts are illegal, Tennessee regulator writes to CFTC
Sports event trading through prediction markets has been a contentious subject in the United States for some time. The Tennessee Sports Wagering Council (TSWC), the agency responsible for monitoring sports betting in Tennessee, has entered the debate by writing a letter to the Commodity Futures Trading Commission (CFTC). The TSWC has essentially told the trading commission that it believes that the sports event contracts being offered violate the state’s law.
“We are writing to express our concerns with the sports event contracts currently being offered in Tennessee by Commodity Futures Trading Commission (CFTC) regulated entities. We believe that these sports event contracts are Wagers under the Act and are being offered in violation of Tennessee law and regulations,” TSWC said in its letter to CFTC sent on 14 April 2025.
“The sports event contracts give consumers the option to purchase contracts corresponding to one of two outcomes of an event. In a sporting event context, a consumer is purchasing a contract that reflects their prediction of which team they believe will win or lose the matchup. The ultimate result is money being won or lost based on the outcome of a game,” it added.
Companies such as Kalshi, Robinhood, and Crypto.com are at the centre of the storm here. The Lower Manhattan-based Kalshi has already received cease-and-desist letters from at least six states, including Nevada, New Jersey, Ohio and Maryland.
Sports wagering council’s challenge to CFTC
This letter from TSWC Executive Director Mary Beth Thomas has been sent ahead of CFTC’s anticipated roundtable discussion on prediction markets scheduled for 30 April 2025.
At the heart of the TSWC’s communication lies the unambiguous assertion that sports event contracts offered by CFTC-regulated platforms constitute “Wagers” as defined by the Tennessee Sports Gaming Act.
The regulator argues that these offerings are illegal within Tennessee as they are provided without the requisite state-issued sports wagering license.
The council also stressed the functional similarity between these contracts and traditional sports bets: consumers purchase contracts that reflect their prediction of a team’s victory or defeat, with financial gain or loss directly tied to the outcome of the sporting event.
Do prediction platforms violate Tennessee law?
The letter from TSWC details multiple ways in which these platforms allegedly violate Tennessee’s established laws and regulations.
- Licensing: The core violation cited is operating a system for accepting money risked on sports outcomes without a valid TSWC license, directly contravening the Tennessee Sports Gaming Act.
- Consumer protection deficits: The TSWC also argues that these platforms fail to meet Tennessee’s mandated consumer protection standards. This includes allowing individuals under the age of 21 to participate (Tennessee’s legal age for sports betting is 21), circumventing state prohibitions on using credit cards and cryptocurrency for funding accounts and lacking required responsible gambling measures such as self-exclusion lists.
Furthermore, the TSWC expressed concern that these platforms might permit wagers on types of events strictly forbidden in Tennessee’s regulated market, such as individual college athlete actions, injuries, penalties, or specific in-game college proposition bets.
- Operational violations: The letter also pointed to non-compliance with other operational rules required of licensed operators, such as maintaining lists of ineligible bettors, adhering to a ban on using kiosks for account creation or access, and implementing specific anti-money laundering (AML) controls mandated by the state.
- Click here to access the complete version of the Tennessee sports regulator’s letter to the CFTC.
Kalshi faces nationwide regulatory hurdles
Tennessee’s formal objection to the CFTC is part of a broader pattern of state-level resistance against prediction markets offering sports-related contracts. A growing number of state gaming regulators have taken action against platforms like Kalshi, Robinhood, and Crypto.com, viewing their sports event contracts as unlicensed sports wagering operating outside established state frameworks.
