Nashville, January 12, 2026, 11:00 CST
- Tennessee has directed Kalshi, Polymarket, and Crypto.com to stop offering sports “event contracts” to residents within the state
- The regulator gave a Jan. 31 deadline to unwind positions and return funds to customers, warning that fines would increase if ignored
- Kalshi has filed a lawsuit in federal court, claiming the state is overstepping its bounds
Tennessee’s sports betting regulator has ordered prediction market platforms Kalshi, Polymarket, and Crypto.com to halt offering sports event contracts to state residents. The companies received cease-and-desist letters demanding they stop operations immediately. 1
This shift is significant as sports-linked prediction markets have grown rapidly, muddying the waters between trading and gambling. States that regulate sportsbooks are now pushing to regulate these contracts similarly, aiming to curb their rise as a go-to method for “betting” on games.
The platforms see this as a battle for territory. They insist these contracts qualify as financial products rather than bets, warning that enforcement varying by state could stifle a nationwide market.
In letters dated Jan. 9, the Tennessee Sports Wagering Council ordered the firms to halt sports contracts, cancel pending bets, and refund Tennessee customers by Jan. 31, according to a copy of the directive shared by U.S. betting media. The council warned that fines could start at $10,000 for a first offense and jump to $25,000 for repeat violations, adding it might pursue an injunction. Sports betting attorney Daniel Wallach, who posted the letters, said “lawsuits are imminent.” 2
Kalshi confirmed it is already involved in litigation. “As other courts have recognized, Kalshi is a regulated, nationwide exchange for real-world events, and it’s subject to exclusive federal jurisdiction,” spokesperson Elisabeth Dina said. She added the company has filed a federal lawsuit to block what it calls an unlawful effort to regulate it under state law. Polymarket and Crypto.com did not immediately respond to requests for comment. 3
Event contracts are usually straightforward, yes-or-no bets that pay off depending on whether a specific event occurs. Traders can buy and sell these contracts ahead of the outcome, making them resemble a pared-down derivative—even when the underlying event is something like a game result.
Tennessee’s letters accuse the platforms of offering sports contracts without the required state license under the Tennessee Sports Gaming Act, Gambling Insider reported. They also claim these platforms aren’t paying the tax linked to sports wagering. The council pointed to their failure to meet sportsbook-style safeguards, highlighting issues with the state’s 21-and-over rule, anti-money laundering measures, and responsible-gambling protections. The letters, signed by SWC executive director Mary Beth Thomas, were copied to state Attorney General Jonathan Skrmetti, according to the report. 4
This dispute places these platforms alongside major licensed sportsbook brands, which must follow state permits and comply with rules on age verification, advertising, and consumer protections. Tennessee’s stance is clear: if it acts like a wager and pays out like one, the label attached is irrelevant.
The legal situation is tangled. In November, a federal judge in Nevada ruled that Kalshi has to follow state gaming regulations in a dispute over sports-related contracts, dismissing the company’s claim that federal commodities law preempts state rules. Kalshi is currently appealing the decision. 5
Crypto.com’s Cronos token (CRO) slipped roughly 1% on Monday, following Tennessee’s action that renewed focus on U.S. regulatory scrutiny of sports-related trading products. 6
The Tennessee order isn’t immediately enforceable, and the legal battle could shift the schedule. Should a judge decline to intervene, companies might need to scrap contracts fast and issue refunds on a strict timeline. On the other hand, a court ruling favoring the platforms could weaken enforcement efforts in other states.
