Tennessee Orders Prediction Markets Offline; Kalshi & Polymarket Face Jan. 31 Deadline

The Tennessee Sports Wagering Council (SWC) has issued cease-and-desist orders to Kalshi, Polymarket, and Crypto.com, demanding an immediate halt to "sports event contracts" in the state. In letters distributed Friday, the regulator ordered the platforms to void all open contracts and refund Tennessee-based users by January 31, escalating the jurisdictional war between state gambling commissions and federal derivatives markets.

The Ultimatum

Tennessee SWC Executive Director Mary Beth Thomas did not mince words. The regulator classified prediction market contracts as unlicensed gambling, explicitly rejecting the defense that these platforms operate under Commodity Futures Trading Commission (CFTC) oversight. The mandate requires the firms to:

• Cease Operations: Immediately stop offering sports-linked binaries to Tennessee residents.
• Liquidity Drain: Void all pending contracts initiated by users in the state.
• Refund: Return all deposits by the end of the month.

The sports events contracts offered on Kalshi’s exchange are not compliant with these protections… and are an immediate and significant threat to the public interest of Tennessee.

While Kalshi has previously battled state regulators in Nevada and New Jersey, this marks the first publicly confirmed state-level cease-and-desist order targeting Polymarket since its U.S. relaunch in late 2025. Crypto.com’s native token, Cronos (CRO), reacted sluggishly to the news, slipping 5% to hold support at $0.10 amidst broader market chop.

Senate Showdown Looms

The timing of Tennessee’s enforcement is calculated. It arrives less than a week before a critical legislative double-header in Washington. On January 15, both the Senate Agriculture and Banking Committees will hold simultaneous markups on crypto market structure legislation.

This synchronized legislative push aims to finally resolve the "commodity vs. security vs. gambling" classification that has left operators like Kalshi navigating a patchwork of state lawsuits despite holding federal licenses. Tennessee’s aggressive stance effectively dares the platforms to sue, setting the stage for a judicial clash that could force Congress’s hand.

Kalshi and Polymarket are expected to challenge the order, likely citing federal preemption under the Commodity Exchange Act. Until a federal judge intervenes, Tennessee liquidity remains effectively frozen.