Tennessee Cracks Down on Kalshi, Polymarket, Crypto.com

Tennessee’s Sports Wagering Council (SWC) has cracked down on prediction market platforms, Polymarket, Kalshi, and Crypto.com and ordered a stop to their sports-related contracts. The state issued ‘cease-and-desist’ letters to the trio.

According to the update, the Tennessee regulator classified their sports event prediction contracts as unlicensed staking under state laws and demanded refunds by January 31, 2026.

Tennessee Labels Sports Prediction Markets as Illegal Gambling Products

Notably, the state of Tennessee is accusing these platforms of offering products that regulators consider illegal sports betting. Although the platforms describe them as “prediction markets” or “event contracts,” authorities have ordered their immediate stop.

Additionally, all existing and pending contracts that involve Tennessee customers must be canceled, and all affected users must get a refund before the January 31 deadline.

This suggests that Tennessee is equating sports outcome contracts with sports betting, whether offered via crypto, prediction markets, or traditional sportsbooks. The state has signaled that it will take legal action if any of the platforms fail to comply.

Tennessee’s letter spelled out that noncompliance could attract civil fines of up to $25,000 per violation.

Tennessee Regulator’s Stance 

It is worth mentioning that in 2025, the Sports Wagering Council urged the U.S. Commodity Futures Trading Commission (CFTC) to prohibit sports event contracts. The SWC argues that the products circumvent state protection laws on age verification, anti-money laundering requirements, and responsible gambling rules.

Officials have also stated that prediction markets are a threat to state tax revenue generated by licensed sportsbooks.

The crackdown by Tennessee on prediction markets for sports outcomes has sparked broader legal considerations. It raises concerns about federal preemption in gambling regulations in the U.S. If Tennessee follows through on this crackdown, other U.S. states might take similar actions and increase regulatory pressure on prediction markets.

Kalshi Lawsuit Raises Federal vs State Oversight Debate

Meanwhile, Kalshi, which is a CFTC-regulated exchange, has responded by filing a lawsuit in a federal court. Kalshi is asserting exclusive federal oversight for event contracts and claims that they are different from traditional sportsbooks with higher edges. Kalshi charges a low fee of between 0.0% and 0.4% compared to the 5-7% fees of the latter.

Coinbase had in December 2025 sued three U.S. states over their regulation of prediction markets.