- SWC demands unlicensed platforms stop sports contracts, refund deposits, and void active bets by Jan. 31, 2026.
- Federal oversight via CFTC does not exempt platforms from state gambling laws, says Tennessee regulator.
- Legal battles in multiple states may set key precedents for prediction markets and sports wagering regulation.
Tennessee has delivered a strict order to prediction market platforms Kalshi, Polymarket, and Crypto.com, demanding they immediately stop offering sports betting contracts in the state.
The Tennessee Sports Wagering Council (SWC) pointed to violations of the Tennessee Sports Gaming Act and ordered a refund of all deposits and the cancellation of active contracts by January 31, 2026. The SWC’s rationale for this action concerns a lack of licensing approved by the state, potentially putting local consumers at risk and leaving them without access to state oversight regulatory measures.
“The SWC noted that the packaging of sports bets as ‘event contracts’ does not necessarily cloak these agreements from state gaming laws,” explained a report on the matter. “The council also pointed to a lack of consumer protection laws, including concerns about youth access, responsible gaming, and money laundering.”
Tennessee wants to make sure companies follow the law and protect residents from unregulated betting. The SWC also warned that breaking the rules could cost up to $25,000 per violation and lead to legal trouble.
Federal vs State Oversight
Kalshi and Polymarket operate under federal commodities law and maintain relationships with the US Commodity Futures Trading Commission (CFTC). However, the SWC argued that federal oversight does not override Tennessee’s authority to regulate sports wagering within its borders.
Additionally, the legal debate extends beyond Tennessee. Last month, a federal judge temporarily blocked Connecticut from enforcing a similar cease-and-desist order against Kalshi. Judge Vernon Oliver granted the company a short-term reprieve while the court evaluates Kalshi’s claim that its contracts fall exclusively under CFTC regulation.
Kalshi has actively challenged state regulators nationwide. The company has filed lawsuits against authorities in New York, Massachusetts, New Jersey, Nevada, Maryland, and Ohio. Moreover, Connecticut’s dispute involves Robinhood and Crypto.com, which also faced allegations of unlicensed sports wagering. Hence, these cases may set precedents on whether prediction market contracts linked to sports outcomes count as illegal gambling.
Implications for the Industry
The Tennessee order shows rising conflicts between prediction markets and state gambling rules. It also warns that platforms could face serious trouble if they offer sports bets without proper state licenses.
Consequently, companies must navigate federal oversight while adhering to state-specific gambling laws. “The SWC ordered the companies to immediately stop offering sports-related contracts to Tennessee residents,” the regulator stated, signaling a firm stance. As the legal battles unfold, the outcome may reshape the regulatory landscape for prediction markets across the U.S.
