Tennessee Wants to Make Playing Prediction Markets a Felony

Prediction markets have exploded in popularity over the past two years, drawing millions of users to platforms like Kalshi and Polymarket who want to put money on everything from sports outcomes to political elections to cultural events. But in Tennessee, state lawmakers are done watching from the sidelines. A bill advancing through the legislature this week would make certain participation in prediction markets a felony-level offense — and the implications for everyday users are serious enough that the broader industry is paying close attention.

Senate Bill 1992, sponsored by State Sen. Ferrell Haile (R-Gallatin), cleared the Senate Judiciary Committee nearly unanimously in late March 2026, with only State Sen. London Lamar declining to vote either way. The bill could head to a full Senate floor vote within days. Paired with its House companion bill HB 2079, this legislation marks one of the most aggressive moves any state legislature has made against prediction market participants — not just the platforms themselves.

What the Bill Actually Says — and Who Could Be Charged

SB 1992 targets a specific type of conduct: influencing the outcome of an event while simultaneously holding a prediction market position that benefits from that outcome. Under the bill, if a person takes action to sway the result of an event — and profits from a contract on Kalshi, Polymarket, or any similar platform because of it — that constitutes a criminal offense. The same applies if the benefiting contract belongs to someone else who was in on the scheme.

The charge is classified as a Class E felony in Tennessee, the lowest rung on the state’s felony ladder — but still a felony. A Class E felony conviction in Tennessee can carry a prison sentence of one to six years and fines of up to $3,000, depending on the sentencing range and the specifics of the case. That is a significant consequence for what might otherwise look like a clever, if unsportsmanlike, wager.

Sen. Haile has pointed to a real-world example that helped inspire the bill: the widely circulated story of a man who placed a bet on Kalshi that someone would streak during the Super Bowl — then ran out onto the field himself to make it happen. “He placed that wager and then he was the one that ran out on the field, causing the event to take place,” Haile told NewsChannel5. That story is more funny than sinister, but the underlying principle scales quickly. Imagine a player shaving points, an insider leaking information, or a public official steering a decision while holding a financial position on the outcome. That is the conduct SB 1992 is designed to criminalize.

Importantly, the bill does not create a new licensing regime or regulatory framework for prediction markets themselves. It is a criminal add-on — a law aimed at manipulation, not at everyday participation in the market. But the lines of what counts as influencing an outcome are not always as clear as a Super Bowl streaker.

What This Means for Tennessee Users of Prediction Markets

For the average Kalshi or Polymarket user in Tennessee, SB 1992 in its current form is not directly aimed at routine participation. If you are simply placing a bet on who wins the next Tennessee Titans game without any ability to influence the outcome, you are not the target of this legislation. But the bill does exist in a broader context of Tennessee’s aggressive posture toward prediction market platforms — and that full picture paints a less comfortable picture for users in the state.

Earlier in 2026, the Tennessee Sports Wagering Council sent cease-and-desist letters to Kalshi, Polymarket, and Crypto.com, demanding they stop offering sports-related event contracts to Tennessee residents, void all pending contracts, and return deposits. The Council argued those platforms were operating as unlicensed sportsbooks under state law. Kalshi pushed back hard, filing a federal lawsuit and ultimately winning a preliminary injunction in February 2026 from the U.S. District Court for the Middle District of Tennessee. The federal court found that Kalshi’s contracts are likely swaps under the Commodity Exchange Act and that federal law likely preempts Tennessee’s enforcement effort.

So while Kalshi won that round, the legislative track is running in parallel. SB 1992 does not try to regulate the platforms directly — a strategy that has repeatedly run into federal preemption arguments. Instead, it criminalizes the conduct of individual participants. That is a different legal lever, and one that has not yet been tested in court. For users in Tennessee, that uncertainty matters. The platforms themselves have largely framed the situation as a federal vs. state jurisdictional dispute, but a felony statute targeting individual behavior is harder to fight on preemption grounds alone.

The Coalition for Prediction Markets, a trade group that has been running a public advocacy campaign, has argued that regulated prediction markets are transparent and beneficial. The group recently purchased a full-page ad in The Washington Post pushing for clearer federal rules. But those efforts are aimed at Washington, not Nashville — and Tennessee lawmakers do not appear to be waiting for federal clarity before acting.

Tennessee Is Not Alone — But It Is Among the Most Aggressive

Tennessee’s legislative push sits within a much larger national battle over how prediction markets should be regulated. At least eleven states introduced legislation targeting prediction markets in 2026, and regulators in at least that many have issued cease-and-desist orders against platforms like Kalshi and Polymarket. The approaches vary widely from state to state, and that inconsistency is part of what makes the landscape so volatile.

Hawaii went furthest on the outright ban side — the Hawaii House passed HB 2198, which would expand the state’s definition of gambling to include prediction markets and make them entirely illegal. New York has introduced multiple bills targeting public officials and lawmakers who trade on prediction markets using information gathered through official duties. California is pursuing a similar conflict-of-interest approach, focused on government insiders rather than everyday users. At the federal level, Rep. Ritchie Torres of New York introduced the Public Integrity in Financial Prediction Markets Act of 2026, targeting covered officials specifically.

Tennessee’s approach is more targeted than Hawaii’s outright ban but more aggressive in one key respect: it uses criminal law, not civil regulation, to go after participants. No other state has moved this close to passing a bill that could put individual market participants in prison. That distinction has drawn attention from legal observers who note the bill is still relatively narrow in scope — it requires both the influencing behavior and the financial benefit — but who also warn that broadly worded manipulation statutes can expand in practice far beyond their original intent.

The state also has a clear financial motivation. Tennessee’s licensed sportsbook operators pay into a system that generated hundreds of millions in taxable wagers monthly. Prediction markets currently generate zero tax revenue for the state, and regulators have estimated that unlicensed and unregulated platforms account for roughly 30 percent of missing tax revenue from the broader gambling market. SB 1992 does not fix that revenue gap, but it signals that Tennessee lawmakers are willing to use every tool available — including felony charges — to keep the pressure on an industry they feel is operating outside the rules.

With the bill headed toward a full Senate floor vote, the prediction market industry is watching Tennessee closely. Whatever happens next in Nashville will matter well beyond state lines.