Tennessee’s sports betting regulator has ordered Kalshi, Polymarket, and Crypto.com to immediately stop offering sports-related event contracts to residents of the state. In cease-and-desist letters dated Friday, the Tennessee Sports Wagering Council said the platforms were running unlicensed sports wagering products in violation of state law.
The council said users were effectively betting on the outcomes of sporting events through these contracts. Calling them “event contracts” did not change the legal analysis, according to the regulator, because the underlying activity mirrored sports betting. The order also requires the companies to void all existing sports-related contracts entered into by Tennessee users and refund all funds held for those users by Jan. 31, 2026.
Tennessee says the contracts function as sports wagers
Under the state’s Sports Gaming Act, wagering on sports outcomes is reserved for licensed sportsbooks. Tennessee argues that the products offered by Kalshi, Polymarket, and Crypto.com’s derivatives platform fall within that category because they let users take positions on game results.
The letters also point to missing consumer protections. Licensed sportsbooks in Tennessee must meet standards on age verification, responsible gaming tools, and anti-money laundering controls. The council said those protections are absent or insufficient on prediction market platforms, leaving users exposed to risks that state law is meant to limit.
If the firms do not comply, the regulator warned of penalties of up to $25,000 per violation. Continued noncompliance could also bring court action or referrals to law enforcement for investigation into illegal gambling activity.
State gambling authority clashes with federal market oversight
Kalshi and Polymarket have argued that their contracts fall under federal commodities law and have pointed to oversight by the Commodity Futures Trading Commission. Tennessee rejected that position, saying federal commodities regulation does not displace the state’s authority over sports wagering within its borders.
The dispute reflects a wider conflict across the U.S. Federal regulators have allowed certain event contracts to trade under commodities rules, while state gambling regulators are taking the view that contracts tied to sports outcomes cross into restricted territory. That split is creating legal uncertainty for platforms offering sports-linked prediction markets across multiple states.
Similar fights are already underway in other states
Tennessee’s move follows similar action elsewhere. Last month, a federal judge temporarily blocked Connecticut regulators from enforcing a cease-and-desist order against Kalshi while the court considers the company’s request for a preliminary injunction. Further filings are due in January, and oral arguments are scheduled for mid-February.
Connecticut had accused Kalshi, Robinhood, and Crypto.com of offering unlicensed sports wagering through event contracts. Beyond Connecticut and Tennessee, Kalshi has filed lawsuits or faced regulatory challenges in New York, Massachusetts, New Jersey, Nevada, Maryland, and Ohio. The same question runs through these cases: whether sports-related event contracts should be treated as financial instruments or unlawful gambling products.
Tennessee’s order shows that state-level pressure on sports prediction markets is intensifying. If other states take the same approach, platforms may need to geofence sports contracts or narrow the scope of their offerings.