Tennessee’s sports betting regulator has ordered prediction market platforms Kalshi, Polymarket and Crypto.com to stop offering contracts on sports events to residents of the state.
In cease and desist letters dated Friday, the Tennessee Sports Betting Council (SWC) accused all three platforms of illegally offering sports betting products without holding a license issued under the Tennessee Sports Gaming Act, according to copies of the letters. published on X by sports betting attorney Daniel Wallach.
SWC said sports contracts listed on the Kalsha, Polymarket and Crypto.com North American Derivatives Exchange allow users to bet on the outcome of sporting events, a practice Tennessee law reserves exclusively for licensed sportsbooks. The regulator argued that packaging the products as “event contracts” did not exempt them from state gambling laws.
The regulator also pointed to consumer protection requirements imposed on licensed operators, including age restrictions, responsible gaming tools and anti-money laundering controls, which it says are not offered by the platforms.
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Tennessee orders prediction markets to issue refunds
The SWC ordered the companies to immediately stop offering sports-related contracts to Tennessee residents, cancel all existing contracts with in-state customers and return all funds deposited by January 31, 2026.
Failure to comply can result in fines of up to $25,000 per violation, the letters state. The regulator also warned that further non-compliance could lead to a ban and referral to law enforcement for further investigation into illegal gambling operations.
Although Kalshi and Polymarket are registered with the US Commodity Futures Trading Commission (CFTC), SWC argues that the federal registration does not invalidate Tennessee’s authority to regulate sports betting within its borders.
Cointelegraph reached out to Kalshi, Polymarket and Crypto.com for comment, but did not receive a response by post.
Related: The CFTC issues a no-action letter to Bitnomial, clearing the way for event contracts
A judge temporarily blocks Connecticut from enforcing the order against Kalshi
Last month, a US federal judge temporarily barred Connecticut regulators from enforcing a cease-and-desist order against Kalshi, giving the company a short-term reprieve while the legal dispute progresses. The order follows action by the Connecticut Department of Consumer Protection, which accused Kalshi, Robinhood and Crypto.com of offering unlicensed sports betting through online event contracts.
Kalshi challenged the state’s move in court, arguing that his event contracts fall under federal commodity law and are regulated solely by the CFTC. Judge Vernon Oliver ruled that Connecticut must stay enforcement while the court considers Kalshi’s request for a preliminary injunction, setting January filing deadlines and scheduling oral arguments for mid-February.
The case adds to a growing legal battle between Kalshi and state regulators across the country, as several states have questioned whether contracts in sports-related prediction markets constitute illegal gambling. Kalshi has filed lawsuits against regulators in New York, Massachusetts, New Jersey, Nevada, Maryland and Ohio.
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