The Tennessee Sports Wagering Council has taken decisive action against Kalshi, Polymarket, and Crypto.com by issuing formal cease-and-desist letters, accusing these platforms of running unlicensed sports wagering operations disguised as event contracts. The orders mandate that the companies cease offering sports-related contracts to residents of the state, nullify all pending contracts, and provide full refunds to affected users by January 31.
Mary Beth Thomas, Executive Director of the Council, articulated in the letters that the sports event contracts provided by these platforms do not comply with state consumer protection regulations and present “an immediate and significant threat to the public interest of Tennessee.” Although the companies are designated contract markets registered with the Commodity Futures Trading Commission (CFTC), Tennessee regulators assert that federal registration does not exempt them from the state’s gambling licensing requirements.
Per the state’s Sports Gaming Act, any entity accepting wagers on sporting events is required to obtain a Tennessee-issued license—something that none of the three companies have secured. The council has warned that continuing operations could lead to civil penalties beginning at $10,000 for a first violation and escalating to $25,000 for any subsequent offenses. Moreover, state officials have threatened criminal referrals for aggravated gambling promotion, which is categorized as a felony under Tennessee law.
This move places Tennessee among at least ten other states that have taken action against prediction market platforms over the last year. States such as Nevada, Arizona, Illinois, and New Jersey have previously issued similar cease-and-desist orders to Kalshi. A federal court in Nevada ruled in November that sports event contracts classify as gambling, undermining the platforms’ claims that CFTC registration provides them with federal protection from state enforcement actions.
In December, Connecticut issued comparable orders against Robinhood, Kalshi, and Crypto.com, marking a growing trend among states challenging these platforms. Additionally, Wisconsin’s Ho-Chunk Nation has filed a lawsuit against Kalshi and Robinhood, arguing that the companies violated federal gaming laws and tribal sovereignty.
The cease-and-desist order from Tennessee appears to be the first targeted specifically at Polymarket, which re-entered the U.S. market last year after acquiring the derivatives exchange QCX for $112 million, and is currently limited to offering sports-related contracts to American customers.
The dispute underscores an intensifying battle between federal and state authorities regarding the regulation of prediction markets. The platforms argue that their CFTC oversight allows them to operate across the nation, despite state gambling restrictions. Kalshi has also initiated federal lawsuits against cease-and-desist orders, contending that states do not possess the authority to regulate federally governed derivatives exchanges. Earlier this year, Crypto.com filed a lawsuit in Nevada challenging similar state-imposed restrictions.
State officials maintain that these unregulated prediction markets strip tax revenue from legally licensed sportsbooks while circumventing essential consumer protections, including age verification and responsible gaming measures. Currently, Tennessee licenses 12 sports betting operators and reported over $305 million in tax revenue from wagers in July 2025 alone. Mary Beth Thomas pointed out that unlicensed offshore and unregulated platforms account for approximately 30% of the state’s missing tax revenue.
With a three-week compliance deadline looming, the platforms face escalating financial penalties and potential criminal prosecution if they fail to adhere to the state’s orders. Legal experts predict that Kalshi will likely challenge the cease-and-desist order in federal court, following a precedent set by the company in other jurisdictions. The CFTC has recently advised its registered exchanges and clearing organizations to prepare for state regulatory actions by implementing robust contingency planning and risk management procedures.
