A lawmaker in Tennessee introduced legislation to try to combat the manipulation of events tied to prediction market trading.
Sen. Ferrell Haile filed Senate Bill 1992 last week, proposing a penalty for anyone “who engages in conduct intended to influence the outcome of an event while the person or another is a party to a contract with a prediction-market by which the person will benefit, directly or indirectly, from the occurrence of the outcome.” SB 1992 would amend the Tennessee code to make any person who violates the bill guilty of a Class E felony.
Under Tennessee law, a Class E felony is the lowest felony class and is punishable by a prison term that ranges between one and six years, with fines that can reach up to $3,000. Crimes also associated with Class E felonies include fraud-related offenses, theft of property and drug and gun possession.
Tennessee regulator’s stance on sports event contracts
Haile filed SB 1992 after the Tennessee Sports Wagering Council (SWC) attempted regulatory enforcement action against prediction markets that offer sports event contracts.
Late last year, the regulator sent cease-and-desist orders to Kalshi, Polymarket and Crypto.com for offering sports event contracts in the state in which it equated sports event trading to illegal sports wagering. The SWC also sent a letter to the Commodity Futures Trading Commission (CFTC), asking the agency to no longer allow sports event contract trading in the state.
Kalshi responded to the SWC’s cease-and-desist order by suing the regulator and Attorney General Jonathan Skrmetti, arguing that it would suffer irreparable harm if unable to offer sports event contracts in Tennessee. The prediction market was granted a temporary restraining order by a Tennessee District Court judge on Jan. 12, allowing the firm to offer sports event contracts in the state while its suit against Tennessee’s gaming regulator continues to move forward.
Other legislation centered around prediction markets
the Tennessee bill is not the first introduced in the U.S. aimed at preventing manipulation of prediction markets.
Last month, New York Congressman Ritchie Torres filed the federal Public Integrity in Financial Prediction Markets Act. The piece of legislation would ban federal officials and executive branch employees from trading event contracts that are related to government action or policy.
Torres introduced the act after a trader on Polymarket’s global site raised insider trading concerns after they were able to pocket over $400,000 after trading around $30,000 on the political status of Venezuelan President Nicolás Maduro before his arrest by U.S. federal authorities. The trades raised concerns despite no confirmation of insider knowledge.
Lawmakers in New York are also considering state Assembly Bill 9635, a measure that would prohibit public officers in the state from using prediction markets and online sports wagering platforms. The bill calls out prediction markets and sports betting operators by name, banning officials or employees of state agencies from using event contract platforms Polymarket, Kalshi, Robinhood, PredictIt and Iowa Electronic Market.
AB 9635 also bans officials from using FanDuel and DraftKings‘ prediction products.
Predictions trade group publishes WaPo ad
The Coalition for Prediction Markets also responded to recent insider trading concerns by taking out a full-page ad in The Washington Post, which intends to show the differences between prediction markets that are CFTC-registered and unregulated platforms, asserting that CFTC-backed platforms offer safe and transparent event contract trading.
The coalition has a membership that includes Crypto.com, Kalshi, Robinhood, Coinbase and Underdog.
