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TV replays made the ref's decision look harsh, but Sylvan Ebanks-Blake made no mistake from the spot.
Six minutes later Blackpool equalised through Gary Taylor-Fletcher. The Wolves defence failed to deal with a long throw-in by Shaun Barker, which was flicked on at the near post by Ian Evatt.
Taylor-Fletcher found himself unmarked at the back post and using good control, he brought the ball down and scored from eight yards.
The home side were well on top at this stage with the Wolves defence finding it hard to cope with the clever touches of Alan Gow, who was playing almost certainly his last game for the Seasiders.
Gow tested Wayne Hennessey with a magnificent low drive in the 28th minute which the Wolves keeper just managed to turn away.
Wolves' dangerman was Matt Jarvis, whose pace often caught out Blackpool wing-back Ian Harte, who was playing his first full game since April.
On 39 minutes Jarvis won a chase with Harte, but home keeper Paul Rachubka managed to use his feet to keep out the shot.
Wolves boss Mick McCarthy used three substitutes early in the second half in a bid to lift his side and on 63 minutes, Jarvis was clean through but once again the Blackpool goalkeeper kept his effort out.
Seven minutes later Jarvis made no mistake when he finished a sweeping move out of defence with a well-taken low drive.
Home skipper Edwards got his revenge for the penalty decision with six minutes to go.
Winger Kyel Reid - always a thorn in Wolves' side - fired in a free-kick. Evatt's header was on target, but didn't have the necessary power before Edwards forced the ball over the line.