Tennessee’s regulator has ordered prediction market platforms Kalshi, Polymarket, and Crypto.com to stop offering sports-related contracts in the state.
Key Takeaways:
Tennessee ordered Kalshi, Polymarket and Crypto.com to halt sports-related contracts and issue refunds by Jan. 31, 2026. Regulators allege the platforms are offering unlicensed sports wagering in violation of state law. Failure to comply could result in steep fines and potential criminal referrals.In cease-and-desist letters filed on January 9, the Tennessee Sports Wagering Council (SWC) directed the three companies to immediately halt sports event contracts offered to Tennessee customers, void all existing contracts entered into by state residents, and refund all customer funds by January 31, 2026.
Tennessee Regulator Accuses Prediction Markets of Unlicensed Sports Wagering
The regulator accused the platforms of operating unlicensed sports wagering products in violation of the Tennessee Sports Gaming Act.
In a letter addressed to Polymarket, SWC Executive Director Mary Beth Thomas wrote that the company’s sports event contracts fail to meet state consumer protection standards and pose “an immediate and significant threat to the public interest of Tennessee.”
Nearly identical language appeared in the letters sent to Kalshi and Crypto.com’s North American Derivatives Exchange.
All three platforms are registered with the Commodity Futures Trading Commission as designated contract markets, allowing them to list event-based derivatives nationwide.
The companies have argued that federal oversight preempts state gambling laws, though courts have issued mixed rulings on where federal authority ends and state jurisdiction begins.
The enforcement action comes as activity on prediction markets continues to expand.
Polymarket re-entered the US market last year following its $112 million acquisition of derivatives exchange and clearinghouse QCX and began opening its US app to waitlisted users in December.
The Tennessee action appears to be the first publicly disclosed state-level cease-and-desist order specifically targeting Polymarket, which currently offers only sports-related contracts to US users.
Tennessee’s letters outline escalating penalties for noncompliance, including civil fines of up to $25,000 per violation.
More significantly, the regulator warned that continued violations could trigger criminal referrals. Under Tennessee law, gambling promotion can carry misdemeanor or felony charges, depending on severity.
State Opposition to Prediction Markets Builds Over Consumer, Tax Concerns
State opposition to prediction markets has been building for months.
In 2025, the SWC urged the CFTC to prohibit sports event contracts, arguing that such products bypass state safeguards such as age verification, responsible gaming rules and anti-money laundering requirements.
Tennessee officials have also warned that prediction markets threaten tax revenue generated by licensed sportsbooks.
The letters were copied to Tennessee Attorney General Jonathan Skrmetti, who has backed other states in legal challenges against Kalshi.
As reported, a new legislation to limit the interactions between government officials and the prediction markets is being supported by more than 30 Democrats in the US House of Representatives, including former Speaker Nancy Pelosi.
The lure behind new restrictions is a controversial Polymarket bet, which started as a bet of $32,000 but eventually became more than $400,000 shortly before the unexpected detention of Venezuelan President Nicolás Maduro.
The bill proposed by the New York Representative Ritchie Torres is the Public Integrity in Financial Prediction Markets Act of 2026.
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