Tennessee Sports Wagering Council Opposes Prediction Markets
The Tennessee Sports Wagering Council (SWC) has taken a formal stance against the operation of sports event prediction markets in the state, requesting that the Commodity Futures Trading Commission (CFTC) refrain from allowing these markets. This appeal was articulated in a letter, signed by SWC Executive Director Mary Beth Thomas, amid increasing scrutiny of such markets on platforms like Kalshi and Robinhood, which are operational across the United States.
While Tennessee’s request doesn’t carry the weight of cease-and-desist orders issued by regulators in states like Nevada, New Jersey, and Illinois, it highlights significant concerns regarding the rise of sports event contracts available on these platforms. The SWC’s letter is intended to be part of the CFTC’s upcoming roundtable discussion scheduled for April 30, which will evaluate the legal and regulatory framework surrounding sports prediction contracts.
The letter enumerates 13 specific violations of Tennessee state laws and regulations that could arise from permitting these contracts. Central to the SWC’s argument is the assertion that accepting wagers on sporting events without a valid license from the SWC contravenes the Tennessee Sports Gaming Act. The council underscores the importance of a licensing regime, which is designed to ensure that all sports wagering adheres to stringent regulatory standards and protects consumers.
Tennessee has instituted various regulatory measures for licensed sports betting operators, including age restrictions on wagering, the establishment of self-exclusion lists, and limitations on funding accounts through credit cards and cryptocurrency. The state also disallows the use of kiosks for account management and enforces anti-money laundering protocols. Additionally, the regulations prohibit wagers on injuries, penalties, or specific actions involving college athletes, including any in-game proposition bets on collegiate teams.
The SWC points out that CFTC-regulated platforms offering sports-related event contracts do not align with Tennessee’s consumer protections and regulatory frameworks. This concern is echoed in ongoing legal battles at the federal level, with similar issues raised in Nevada and New Jersey. Notably, Kalshi, a leading player in the market, has recently managed to secure a preliminary injunction against the Nevada Gaming Control Board.
Meanwhile, the New Jersey Division of Gaming Enforcement is expected to file an opposition to Kalshi’s operational practices in federal court soon. Legal analyst and gaming attorney Daniel Wallach has noted that Kalshi’s contracts might conflict with the federal Wire Act, which prohibits wagering entities from using wire communications to place bets across state lines. Kalshi’s business model, which allows nationwide trading on sporting event outcomes, may place it at risk of violating this longstanding law dating back to 1961.
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In defense of its operations, Kalshi has maintained that it does not restrict users based on geographic location, which complicates the legal landscape further, especially as trades often involve users from multiple states. The federal court in Nevada has recognized this interstate aspect in its ruling granting Kalshi temporary legal protection.
As courts examine the Wire Act’s implications, the interpretation of its language could become a pivotal argument in this ongoing debate. Legal precedents suggest that the Act’s inclusion of the term “business” may extend its reach beyond traditional bookmakers to other entities facilitating wagers.
The upcoming CFTC roundtable is likely to shed light on the agency’s views regarding the legality and regulatory oversight of sports prediction markets. However, the intricate relationship between state regulations, federal laws, and evolving market practices leaves the future of sports wagering in the U.S. uncertain. Tennessee’s letter contributes another layer to a contentious and rapidly evolving legal landscape that could reshape the future of sports betting. Tennessee Prediction Markets
