Tennessee Sweepstakes Casino Ban Joined by Prediction Market Manipulation Felony Law

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Tennessee Gov. Bill Lee has signed two gambling-related bills on the final day of his decision window, banning online sweepstakes casinos and creating a new Class E felony for prediction market manipulation. The dual signing makes Tennessee the seventh U.S. state to outlaw sweepstakes casino operations and one of the first to criminalize the manipulation of prediction market contracts. Tennessee Sweepstakes Casino Ban Joined by Prediction Market Manipulation Felony Law Key Takeaways - SB 2136 bans virtual, dual, and multi-currency online sweepstakes casino games; SB 1992 makes prediction market manipulation a Class E felony. - Tennessee becomes the seventh U.S. state to outlaw sweepstakes casinos, joining California, Connecticut, New Jersey, New York, Montana, and Louisiana. - The prediction market law follows Tennessee’s failed civil enforcement effort against Kalshi in February. Lee Signs SB 2136 and SB 1992 on Final Day of 10-Day Decision Window Tennessee Gov. Bill Lee signed two pieces of gambling legislation on Friday, May 22, the final day of his 10-day decision window after the bills were sent to his desk on May 11. SB 2136 bans online sweepstakes casinos operating in the state, while SB 1992 establishes a new Class E felony offense for prediction market manipulation. The legislature had passed both bills on April 23, the final day of its session, following months of negotiations and a conference committee compromise. SB 2136 prohibits “online sweepstakes games” that utilize virtual currency systems, allowing participants to exchange currency for cash or cash prizes. The law covers a broad range of casino-style products, including slots, table games, bingo, lottery-style games, video poker, and unlicensed sports wagering. Tennessee Attorney General Jonathan Skrmetti had already issued cease-and-desist letters earlier this year that pushed major operators out of the Tennessee market. The signing now codifies the enforcement reality that the AG’s office had imposed through legal pressure. SB 1992 creates a specific Class E felony for individuals who intentionally influence the outcome of an event while participating in a prediction market contract tied to that outcome. The law follows Tennessee’s earlier attempt to push Kalshi out of the state through civil enforcement: state regulators had issued a cease-and-desist letter ordering the prediction market platform to halt sports event contracts, but Kalshi countersued and won a federal preliminary injunction on February 19, allowing it to continue operating. The new criminal-liability statute adds an enforcement layer that the civil case could not deliver, though it targets individual conduct rather than platform operations themselves. The signing concludes a 10-day decision window for Lee. Alongside signing the bills or directly vetoing them, the governor also had the option to let the bills become law without signature, which would have produced the same legal outcome but distanced the governor from the policy choice. With the signing, Tennessee becomes the seventh U.S. state to enact a sweepstakes casino ban. Indiana and Maine have also moved against the dual-currency model in 2026, with Louisiana enacting HB 883 on May 15. The combined state-level pace reflects regulatory consensus that sweepstakes platforms function as unlicensed casino operators despite their promotional sweepstakes framing. On the prediction-markets side, Tennessee’s law arrives within a broader federal preemption fight. Minnesota enacted two prediction-market bills last week, prompting a CFTC lawsuit against the state on May 19. Last week’s Senate Commerce Subcommittee hearing on prediction markets and sports betting also brought renewed federal scrutiny. Tennessee’s choice to pursue criminal liability rather than direct platform bans may reflect lessons from the February Kalshi injunction loss, as targeting individual conduct rather than platform operations as its chosen legal posture may face fewer preemption challenges.

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