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The Tennessee Sports Wagering Council (SWC) issued cease-and-desist orders on January 9, directing three prediction market platforms—Kalshi, Polymarket, and Crypto.com’s derivatives exchange—to immediately stop offering sports-related betting contracts to residents of Tennessee.
Tennessee’s Sports Wagering Council has ordered @Kalshi, @Polymarket, and @cryptocom to stop offering sports event contracts in the state.
The letters require platforms to cease operations, void active contracts, and refund Tennessee users by Jan 31, 2026, citing unlicensed… pic.twitter.com/lqMKmvYWxh
— Crypto Miners (@CryptoMiners_Co) January 11, 2026
According to official filings, the SWC determined that these platforms failed to meet the state’s consumer protection standards. Regulators argue that the contracts offered by prediction markets are effectively sports wagers, regardless of whether they are framed as financial derivatives.
Classified as Illegal Sports Gambling
The SWC concluded that the event-based contracts provided by the platforms fall squarely under Tennessee’s legal definition of sports betting. Because the companies do not hold SWC-issued licenses and have not paid required state taxes, regulators labeled the activity an “immediate and serious threat to the public interest.”
The council ordered the companies to:
- Void all unsettled sports-related contracts entered into by Tennessee residents
- Refund all user funds by January 31, 2026
Failure to comply could trigger escalating penalties.
Fines, Criminal Liability, and Regulatory Tensions
Under the enforcement framework, initial violations carry fines of $10,000, increasing to $15,000 for subsequent offenses. In severe cases, companies could face criminal charges for aggravated promotion of gambling, a felony under Tennessee law.
The crackdown highlights growing friction between state gambling regulators and federally regulated derivatives platforms. Kalshi and Polymarket have repeatedly argued that they operate under the oversight of the U.S. Commodity Futures Trading Commission (CFTC), not state gambling authorities.
However, Tennessee is not acting alone. At least 10 U.S. states have issued similar orders against prediction markets, and Massachusetts has escalated its actions into litigation, underscoring the unresolved jurisdictional conflict between state gaming laws and federal derivatives regulation.
As scrutiny intensifies, the industry is closely watching how Kalshi, Polymarket, and Crypto.com respond and whether federal regulators will step in to clarify the regulatory boundary.
