Prediction Markets
in Tennessee
Tennessee has no state income tax: prediction market winnings are subject to federal income tax only. Combined with one of the earliest US mobile sports betting launches (November 2020), all CFTC-regulated prediction market platforms available, and zero enforcement actions, Tennessee stands alongside Florida and Texas as one of the best states in the US for active prediction market traders.
Which platforms work in Tennessee?
All categories available in Tennessee: sports, economics, politics, weather, and crypto. No state-level restrictions.
Polymarket QCEX is restricted for Tennessee residents while federal-state litigation is ongoing. Tennessee issued cease-and-desist orders against Polymarket in January 2026; a federal judge issued a temporary block on enforcement, leaving the situation unresolved.
Both Mana play-money and Sweepcash real-prize features available in Tennessee.
CFTC no-action exemption. US politics-only, $850 per contract cap. Available in Tennessee.
All prediction market contracts available: sports, economics, and political event contracts fully accessible in TN.
The Tennessee tax advantage for prediction market traders
Tennessee has no broad-based state income tax on wages or investment income. The former Hall Income Tax (on dividends and interest only) was fully repealed in 2021. Prediction market winnings (reported as ordinary income) are subject to federal income tax only. There is no Tennessee state return to file for income tax purposes.
What this means in dollars: A Tennessee trader with $10,000 of Kalshi net profit pays $0 in state taxes. The same trader in California pays $1,330 (13.3%), in New York $1,090 (10.9%), in Virginia up to $575 (5.75%), in North Carolina $475 (4.75%). For active traders, the Tennessee advantage compounds significantly over multiple years.
No-income-tax states: prediction market status
Tennessee was an early mobile sports betting state
Tennessee was one of the first Southern states to legalize mobile sports betting, launching in November 2020. Notably, Tennessee is online-only: there are no physical sportsbook locations. FanDuel, DraftKings, BetMGM, and other major operators are licensed by the Tennessee Sports Wagering Advisory Council. Tennessee has the Titans (NFL), Grizzlies (NBA), and Predators (NHL), plus strong SEC college sports markets (Tennessee Volunteers, Vanderbilt).
CFTC-regulated prediction markets operate alongside Tennessee's licensed sportsbooks without any regulatory conflict. The Tennessee Sports Wagering Advisory Council oversees licensed sportsbooks; Kalshi operates under CFTC federal jurisdiction: entirely separate regulatory lanes.
TN traders have full flexibility: FanDuel/DraftKings for spreads, props, and parlays (TN-licensed); Kalshi for binary outcome contracts, economics, and political markets. No regulatory friction in Tennessee between sportsbooks and prediction markets.
Federal-only tax on Tennessee prediction market winnings
Tennessee has no broad-based state income tax. The Hall Income Tax (dividends/interest only) was repealed in 2021. Prediction market winnings are subject to federal income tax only: no Tennessee state return required for income tax.
Prediction market profits are ordinary income at federal rates (10–37% depending on your bracket). Kalshi issues a 1099-MISC for net annual profits above $600. Report on Schedule 1 (Form 1040) as ordinary income.
Sports betting losses (FanDuel/DraftKings TN) are subject to the 2026 OBBBA 90% deductibility cap. Kalshi prediction market losses are not: they're commodity derivatives, not sports wagers, and are fully deductible as ordinary losses.
How Tennessee compares
Florida
No state income tax, sports betting legal since 2021 (Seminole Tribe exclusivity). Same tax advantage as Tennessee for prediction market traders.
No income taxTexas
No state income tax, sports betting illegal, but Kalshi sports contracts are legal under CFTC preemption. Large, active prediction market community.
Neighbor stateNorth Carolina
Sports betting legal since January 2024. All platforms available. 4.75% flat income tax: traders pay more state tax in NC than TN.