Tennessee Orders Kalshi, Polymarket, and Crypto.com to Halt Sports Event Contracts

Tennessee regulators have ordered prediction market platforms Kalshi, Polymarket, and Crypto.com to stop offering sports-related event contracts to residents of the state, arguing that the companies are violating state gambling laws. The directive was issued through cease-and-desist letters dated Jan. 9 by the Tennessee Sports Wagering Council (SWC), which alleges the firms are operating without the proper state licenses.

According to the SWC, the three platforms are effectively offering illegal sports wagering products while presenting them as event-based financial contracts. Although Kalshi, Polymarket, and Crypto.com are registered with the Commodity Futures Trading Commission (CFTC) as designated contract markets, Tennessee regulators maintain that this federal status does not exempt them from complying with state-level sports gaming regulations.

Under Tennessee’s Sports Gaming Act, any company that accepts wagers on sporting events must obtain a license from the state. The SWC claims that none of the three companies holds such a license. As a result, regulators argue that the sports event contracts offered to Tennessee residents qualify as wagers under state law and are therefore illegal.

The cease-and-desist letters require Kalshi, Polymarket, and Crypto.com to terminate all sports event contract offerings in Tennessee by Jan. 31. The companies must also void any open contracts held by state residents and refund all user deposits associated with those contracts. Failure to comply could result in civil penalties of up to $25,000 per violation, as well as potential criminal referrals for aggravated gambling promotion, which is classified as a felony in Tennessee.

This enforcement action highlights the growing tension between federal derivatives regulation and state gambling laws. While prediction markets argue that they operate legally under CFTC oversight, state regulators across the U.S. have increasingly challenged their sports-related offerings. In December, Connecticut issued similar cease-and-desist orders to Robinhood, Kalshi, and Crypto.com.

Previously, Kalshi defended its position by stating that its products differ significantly from traditional sportsbooks and casinos regulated at the state level. However, neither Kalshi, Polymarket, nor Crypto.com responded to requests for comment regarding the Tennessee action at the time of publication.

The situation underscores ongoing regulatory uncertainty for crypto and prediction market platforms offering sports-related contracts in the United States.