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Gaming Edge’s TL;DR
- Tennessee’s HOPE Scholarship faces funding pressure as players migrate to unregistered prediction markets that sidestep state taxes.
- This shift has cut lottery receipts and raises policy and funding questions for education and wagering regulation.
Tennessee’s lottery-funded HOPE Scholarship is seeing stress after lottery revenue fell from about $500 million to $411 million. Steven Gentile, executive director of the Tennessee Higher Education Commission, blames the rise of prediction markets.
Roughly 170,000 recent graduates receive the scholarship, which officials say delivers significant lifetime earnings gains for recipients.
Economists and state officials point to a migration of wagering activity to prediction market platforms such as Kalshi and Polymarket. They allow bets on events ranging from elections to sports. And they currently operate without Tennessee registration or the same tax obligations as sportsbooks.
As Don Bruce of the Boyd Center put it, these wagers “look and smell and feel exactly the same.” But they aren’t captured under existing state sports wagering tax rules. The state already uses sports betting tax receipts to back K–12 construction and, when needed, to plug Lottery shortfalls.
An uneven field
Sportsbooks licensed in Tennessee face revenue pressure and an uneven competitive field because prediction markets aren’t currently taxed or registered in the same way. That gap can reduce funds available for education programs tied to Lottery receipts and could push lawmakers to act – potentially imposing taxes or registration requirements on prediction platforms.
For bettors, that can mean platform closures, compliance checks, or shifts in where popular markets are offered. For operators, expect lobbying, product shifts, and possible calls for clearer federal guidance. Don Bruce compares the situation to the early challenge of taxing online retailers, noting that state-level fixes may ultimately require federal action to be fully effective.
A bill is moving through the Tennessee Legislature seeking to address the issue, but state experts say federal action may be needed to capture and tax prediction market activity effectively.
Based on reporting by Jack Ziskin for WATE 6News.
