The State of Tennessee on Tuesday announced to stakeholders that it had tentatively selected ClassWallet to provide School Choice Program Management software for its Education Savings Account (ESA) and Education Freedom Scholarship (EFS) programs, starting later this year.
A Tuesday letter from the Tennessee Department of General Services, obtained by The Tennessee Star on Wednesday, announced that the state completed its review of the bids submitted in response to its September 2025 request for proposals to replace its current software and recommended a new contract with ClassWallet.
In 2021, ClassWallet was selected for a no-bid contract to provide software to manage Tennessee’s ESA program, prompting Republicans in the General Assembly to attempt a no-confidence vote against former Tennessee Education Commissioner Penny Schwinn.
Lawsuits blocked the program’s implementation until 2023, when Student First Technologies (SFT) was awarded the contract following a bidding process. Tennessee’s contract with SFT was amended last year to include the new EFS program, but a recent Tennessee Comptroller of the Treasury’s report flagged potential shortcomings with the software.
With Tennessee set to resume its relationship with ClassWallet, the company’s early support from Chinese venture capital may raise questions.
Before the company bid to provide software for Tennessee, ClassWallet in 2016 announced it had raised $1.5 million in a seed funding round led by Idea Bulb Ventures, a Chinese venture capital firm that has since rebranded as Sinovation Ventures.
Sinovation Ventures is chaired by Kai-Fu Lee, a longtime technology expert and Chinese national who spent part of his childhood in Oak Ridge, Tennessee, and who dedicated much of the last decade to predicting that China would lead the world in artificial intelligence (AI) technology.
Microsoft Research founder Rick Rashid told The Wire China last year that he hired Lee to help the company develop its operations in China, and that Lee was especially useful at leveraging parts of his network within the Chinese government.
“I viewed him as somebody who had the kind of drive and initiative that would help us pull together the research lab in China,” Rashid told the outlet. “Once he came on board, he immediately started building relationships within the academic community and the technical, scientific parts of the Chinese government.”
Xiao Qiang, a University of California, Berkeley-based Chinese internet expert, told the outlet that Lee’s investments now stand to serve the interests of China’s surveillance network.
“Kai-Fu Lee has invested in companies producing these surveillance technologies, collecting data and processing it,” Qiang told the outlet. “From my perspective, he is a player in Chinese digital authoritarianism.”
Following Sinovation Ventures’ investment, ClassWallet raised nearly $100 million in subsequent fundraising rounds.
While apparently popular with investors during this period, the company has also drawn criticism from both sides of the political aisle in states across the nation.
Recent signs of troubled relationships with state governments began in 2023, when Democrats in Arizona demanded answers from the company after a data breach reportedly jeopardized the names and disabilities of students. The following year, a Republican lawmaker in Arkansas said that parents “lost a little faith” in school choice due to the state’s reliance on ClassWallet software.
Also in 2024, Oklahoma Governor Kevin Stitt, a Republican, announced the state was suing ClassWallet after the company’s software allegedly failed to prevent school choice funds from being misused.
Most recently, Missouri Treasurer Vivek Malek, also a Republican, announced last August that he was examining his state’s contract with the company in response to the Arizona data breach from two years earlier.
The letter obtained by The Star does not state which other companies bid to provide software for Tennessee’s school choice programs, but in 2023 at least three other companies submitted bids in addition to ClassWallet and SFT: Merit International, Odyssey, and LiftForward Inc.
Other companies that bid can protest the announcement through a process set by the state until January 27.
School choice remains broadly popular among Tennessee Republicans, with two-thirds of respondents recently telling pollsters they would like to see EFS and charter schools expanded. Republicans in leadership have suggested an expansion to the scholarship program could come this year.
– – –
Tom Pappert is a 2025 recipient of the Dao Prize and the lead reporter for The Tennessee Star. He also reports for the Star News Network. Follow Tom on X. Email tips to [email protected].
