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The Tennessee Sports Wagering Council has moved against three prediction market platforms, Kalshi, Polymarket, and Crypto.com, ordering them to pull back from sports-related contracts in the state.
In letters sent out last Friday (Jan 9), regulators instructed the companies to stop offering these products to Tennessee residents, cancel any contracts already in place, and return customer funds. The deadline for refunds has been set for January 31, 2026.
Tennessee regulators threaten heavy fines
Kalshi, Polymarket, and Crypto.com operate as designated contract markets under the CFTC, letting customers trade contracts tied to sports results. Tennessee, however, treats any bet on a sporting event as regulated gaming. Under the state’s Sports Gaming Act, those who take such wagers must first secure a Tennessee license.
The SWC says none of the three platforms holds that license. In its letters, the council states that the sports contracts offered to Tennesseans qualify as wagers under state law and are being sold illegally.
The companies were ordered to stop all in-state activity, with regulators warning of civil fines up to $25,000 per violation. The council also stated that it may refer cases for criminal prosecution on aggravated gambling promotion, a felony under Tennessee law.
Pressure continues to pile on prediction markets
Prediction markets have been growing immensely since last year, and the pressure on them has been keeping pace. Polymarket pushed back into the U.S. last year after buying QCX for $112 million, then began opening its waitlist‑driven app in December.
Tennessee’s move looks like the first state cease-and-desist aimed directly at Polymarket, which offers only sports contracts to US users.
States haven’t stood aside even though these platforms operate under federal derivatives rules. Connecticut sent its own orders in December, targeting Robinhood, Kalshi, and Crypto.com. While federal regulators permit event-based trading nationwide with no restrictions on sports, states continue to insist their gambling laws still apply.
Kalshi is at the center of this fight, with the operator having faced pushback in places like Arizona, Nevada, Illinois, and Ohio, and now says it has taken Tennessee to federal court, arguing its market isn’t sportsbook gambling and shouldn’t be blocked.
Despite the pressure, activity keeps climbing on Kalshi and Polymarket. Experts are projecting a tough legal year for both state regulators and prediction market operators.
