Tennessee Regulators Order Kalshi, Polymarket to Cease Operations by Jan 31

The Lead

The Tennessee Sports Wagering Council (SWC) has issued cease-and-desist orders to Kalshi, Polymarket, and Crypto.com, demanding the platforms immediately halt sports event contract offerings to state residents. In letters dated Friday, the regulator ordered the firms to void all existing contracts and refund user deposits by Jan. 31, 2026, or face civil penalties of $25,000 per offense.

This action marks a sharp escalation in the jurisdictional war between state gambling regulators and the federal oversight of the CFTC. While Kalshi and Crypto.com (via its acquisition of Nadex) operate as CFTC-designated contract markets, Tennessee officials argue their federal status provides no immunity against state gambling statutes.

The Enforcement Actions

The SWC’s directive is explicit: the “event contracts” offered by these platforms effectively function as sports wagers, a category reserved exclusively for licensed sportsbooks under the Tennessee Sports Gaming Act. The regulator rejected the industry’s distinction between “derivatives” and “bets,” stating that any product allowing users to risk capital on sporting outcomes falls under its purview.

“The sports event contracts offered on [the platforms] are not compliant with these protections… and are an immediate and significant threat to the public interest of Tennessee.”
. Tennessee Sports Wagering Council

The letters, publicized by sports betting attorney Daniel Wallach, warn that continued non-compliance will trigger referrals to law enforcement for “aggravated gambling promotion,” a felony in the state.

Institutional Context: State vs. Fed

This crackdown challenges the burgeoning “Federal Preemption” defense used by prediction markets. Following Kalshi’s legal victory against the CFTC in 2024 and Polymarket’s US market re-entry in late 2025, the sector has operated under the assumption that federal commodities licenses trump state gaming laws. Tennessee joins a growing coalition of states, including Connecticut and Arizona, testing that assumption in real-time.

The inclusion of Polymarket is particularly notable. After settling with the CFTC in 2022, the platform recently began onboarding US users via a CFTC-regulated subsidiary. Tennessee’s move suggests state regulators are unwilling to concede authority over sports-related flows, regardless of the federal wrapper.

What’s Next

The platforms have less than three weeks to comply or file for injunctive relief. Wallach noted that “lawsuits are imminent,” likely mirroring the strategy Kalshi employed in its battle against the CFTC. For now, Tennessee residents holding contracts on the Super Bowl or NBA finals face a mandatory liquidation before the end of the month.