Tennessee Governor Signs Sweepstakes Casino Ban and Prediction Market Manipulation Bill Into Law

Tennessee Gov. Bill Lee has signed two significant gambling-related bills into law, banning online sweepstakes casinos from operating in the state and creating a new criminal offense tied to the manipulation of prediction market contracts. The legislation marks Tennessee as one of the most aggressive states in the country when it comes to restricting these fast-growing, largely unregulated corners of the online gambling market.

The sweepstakes casino ban closes the legal loophole that has allowed dozens of platforms to operate nationwide under a promotional model that does not technically require real-money wagering. Under the new law, these platforms are prohibited from doing business in Tennessee. The prediction market manipulation bill, passed alongside it, establishes criminal liability for those who attempt to influence or artificially move the outcome of prediction market contracts.

Growing Pressure on Sweepstakes Casinos

Tennessee is not the first state to move against sweepstakes casinos. Iowa and several other states have enacted or advanced similar legislation in recent months as regulators grow increasingly concerned about the unregulated nature of these platforms. Unlike traditional online casinos or licensed sportsbooks, sweepstakes casinos operate under a legal framework that allows users to play without a formal real-money license, creating a gray area that consumer protection advocates and gaming regulators have pushed to close.

The sweepstakes casino model allows players to receive virtual coins for free through mail or online requests, then use those coins to play casino-style games. A separate class of coins can be redeemed for cash prizes, which is the mechanism that critics argue effectively mirrors real-money gambling. With Tennessee’s ban now in effect, residents who currently use these platforms will no longer have legal access to them within the state.

Prediction Market Manipulation Now a Criminal Offense

The second bill signed by Gov. Lee targets prediction market manipulation, a concern that has grown as platforms like Kalshi and Polymarket have expanded their sports event contracts into mainstream use. The legislation creates a specific criminal offense for individuals who attempt to manipulate the outcome of a prediction market contract through deceptive or fraudulent means.

The move reflects growing legislative concern at the state level about prediction markets, which have operated under federal Commodity Futures Trading Commission oversight while multiple states argue the platforms are effectively engaging in unlicensed sports betting. Tennessee’s new law adds criminal consequences to activity that, at the federal level, remains subject to ongoing regulatory debate.

What Comes Next

For operators in the sweepstakes casino space, Tennessee’s ban adds to an accelerating wave of state-level restrictions. While the industry has so far successfully operated in most of the country, the combination of Iowa’s new oversight law and Tennessee’s outright prohibition signals that the legal landscape is shifting. Platforms that operate in states with new restrictions will need to either comply with new requirements or exit those markets entirely.

For the prediction market industry, the Tennessee development comes as similar battles play out in Rhode Island, Minnesota, and at the federal level, where a Senate hearing earlier this month examined whether platforms like Kalshi and Polymarket should be subject to state gaming regulations. The legal and regulatory framework surrounding both sweepstakes casinos and prediction markets is in flux, and more states are expected to act in the coming legislative sessions. Bettors in Tennessee who have used these platforms should review the new laws carefully to understand how their access has changed.