Tennessee regulators have taken a decisive step to bar prediction market platforms from providing sports betting contracts to the state’s residents. This move is aimed at Kalshi, Polymarket, and Crypto.com, intensifying the ongoing dispute between state gambling regulators and prediction markets regulated by federal government agencies.
The Tennessee Sports Wagering Council (SWC) says the platforms cross the line into illegal sports betting. Regulators now demand an immediate shutdown of the products and full customer refunds by the end of January 2026.
Tennessee Accuses Prediction Platforms of Illegal Sports Wagering
In cease-and-desist letters dated January 9, the SWC ordered Kalshi, Polymarket, and Crypto.com to stop offering sports event contracts in Tennessee. The regulator also directed the companies to void all existing contracts held by Tennessee residents and refund customer funds by January 31, 2026.
BREAKING: Tennessee Sports Wagering Council sends cease-and-desist letters to Kalshi (), Polymarket and Crypto, demanding that they cease offering sports event contracts to TN customers immediately, void all pending contracts and issue refunds by Jan. 31. Lawsuits are imminent. pic.twitter.com/jDIPIwsrCn
— Daniel Wallach (@WALLACHLEGAL) January 9, 2026
The SWC argues that the platforms offer unlicensed sports wagering in violation of the Tennessee Sports Gaming Act. According to the regulator, users wager money on sporting outcomes in a manner reserved exclusively for licensed sportsbooks.
SWC Executive Director Mary Beth Thomas wrote that Polymarket’s sports contracts fail to meet state consumer protection standards. She warned that the products pose “an immediate and significant threat to the public interest of Tennessee.” Regulators used nearly identical language in letters sent to Kalshi and Crypto.com’s North American Derivatives Exchange.
Tennessee law allows fines of up to $25,000 per violation for noncompliance. The SWC also warned that continued violations could lead to criminal referrals. Under the state’s law, gambling promotion may lead to a misdemeanor or felony, based on the degree of offence.
Tennessee Challenges Federal Commodity Claims
Kalshi, Polymarket, and Crypto.com are all prediction platforms registered as designated contract markets by the Commodity Futures Trading Commission (CFTC). The firms claim that federal regulation of commodities legislation supersedes state gambling policies.
Tennessee regulators, however, reject that position. The SWC insists that federal registration does not override state authority to regulate sports wagering within its borders. The council also says that labeling the products as “event contracts” does not exempt them from state gambling statutes.
The regulator highlighted gaps in consumer safeguards. Licensed sportsbooks in Tennessee must enforce age restrictions, responsible gaming tools, and anti-money laundering controls. SWC says prediction markets do not meet these requirements, creating risks for consumers and the state.
Additionally, courts have delivered mixed rulings on the issue. Last month, a federal judge temporarily blocked Connecticut from enforcing a similar cease-and-desist order against Kalshi. The court paused enforcement while it considers Kalshi’s request for a preliminary injunction, with oral arguments scheduled for mid-February.
Political and Legal Pressure Against Prediction Markets Heightens
In 2025, the SWC urged the CFTC to ban sports event contracts nationwide. Officials argued that prediction platforms undermine state safeguards and threaten tax revenue generated by licensed sportsbooks. In the latest move, Tennessee expresses broader resistance from states.
The cease and desist letters sent to prediction platforms were copied to Tennessee Attorney General Jonathan Skrmetti, who has supported other states in legal challenges against Kalshi. Kalshi has already sued regulators in New York, Massachusetts, New Jersey, Nevada, Maryland, and Ohio.
Political scrutiny has also intensified at the federal level. More than 30 Democrats in the US House support new legislation aimed at restricting prediction markets. New York Representative Ritchie Torres introduced the Public Integrity in Financial Prediction Markets Act of 2026.
The bill followed controversy around a Polymarket bet tied to Venezuelan President Nicolás Maduro. That wager reportedly grew from $32,000 to over $400,000 shortly before Maduro’s unexpected detention. Lawmakers now cite the incident as evidence of risks tied to politically sensitive prediction markets.
Rep. Ritchie Torres is introducing the "Public Integrity in Financial Prediction Markets Act of 2026."
The goal is to ban federal officials from using non-public info to bet on political outcomes.
After the $400k "Maduro bet," the era of "consequence-free" political wagering… pic.twitter.com/F8HhlTN425
— Conor Kenny (@conorfkenny) January 6, 2026
For now, Tennessee’s order sets a firm deadline. The outcome may shape how far states can go in reining in prediction markets that straddle the line between finance and gambling.
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