Tennessee’s sports betting regulator has taken decisive action against prediction market platforms Polymarket, Kalshi, and Crypto.com, ordering them to cease sports-related wagering activities. This latest development marks a significant effort by state governments to assert control over the rapidly growing but legally murky arena of sports betting prediction markets.
The Tennessee Sports Wagering Council issued cease-and-desist letters on Friday, mandating the companies to halt any sports betting markets available to customers within the state. Additionally, the firms were instructed to refund all pending wagers related to sports events by the end of the month.
However, these companies have expressed their intention to resist compliance. For several months, they have maintained that their operations are governed by federal regulations, categorizing their sports-related markets as federally regulated events contracts, not subject to state law.
In a swift acting response, Kalshi filed a lawsuit against Tennessee’s attorney general and the sports betting regulator in federal court, asserting that the state lacks the legal authority to regulate its activities or prevent it from servicing customers in Tennessee. The firm has also sought a preliminary injunction and an emergency hearing to expedite judicial review of the state’s demands.
Other states, including Illinois, Connecticut, and Michigan, have previously attempted similar bans on sports prediction markets, but their efforts have largely failed as companies like Polymarket, Kalshi, and Crypto.com continued operations unimpeded.
Despite the regulators’ threats of imposing hefty fines—up to $25,000 for alleged violations—the economic landscape of the prediction market industry appears to incentivize defiance. Kalshi, for example, has recorded over $23.8 billion in trading volumes focused on sports-related bets in the past year alone, making up more than 80% of its overall business.
Tennessee’s regulatory measures highlighted that the involved companies have not met fundamental requirements expected of gambling platforms, such as ensuring all participants are over 21, offering self-exclusion options for gambling addicts, and imposing limits on betting amounts and duration.
As tensions escalate between state authorities and these growing prediction market entities, both sides are increasingly pursuing legal avenues to clarify jurisdictional authority. This ongoing dispute seems poised to reach the Supreme Court for a definitive resolution on the regulation of sports-related prediction markets.
