Shock Move as Tennessee Orders Kalshi, Polymarket and Crypto.com to Halt Sports

Tennessee regulators have issued a firm directive against prediction market platforms operating inside the state. The order immediately affects Kalshi, Polymarket and Crypto.com. According to cease and desist letters shared on X by sports betting attorney Daniel Wallach, the Tennessee Sports Wagering Council accused the firms of illegal activity. Officials said the platforms offered sports wagering without state licenses.

Instead of focusing on labels, regulators examined how the products work. Consequently, they concluded the contracts allow users to place bets on sports outcomes. State officials stressed that Tennessee law limits sports wagering to approved sportsbooks. Hence, offering similar products outside that framework violates the Tennessee Sports Gaming Act.

Additionally, the council rejected arguments tied to federal oversight. It said federal commodities regulation does not eliminate state power over sports betting.

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Licensing concerns trigger immediate enforcement

The council emphasized that none of the platforms hold a valid Tennessee wagering license. Therefore, regulators said continued operations pose a direct legal breach. Beyond licensing, consumer protection stood at the center of the action. Officials pointed to missing age restrictions and responsible gaming safeguards.

Moreover, regulators cited the absence of anti money laundering controls. They warned that such gaps increase risks for users. Under the order, the companies must stop offering sports related contracts to Tennessee residents. They must also void all existing contracts tied to state users.

Significantly, the council ordered full refunds of all deposited funds. Companies must complete refunds by Jan. 31, 2026. Failure to comply may result in fines of up to $25,000 per violation. Regulators also warned of possible injunctions and criminal referrals.

According to the letters, Crypto.com’s North American Derivatives Exchange received specific scrutiny. Officials said its listed contracts closely resemble traditional sports bets. Meanwhile, Kalshi and Polymarket have argued in other disputes that federal law governs their offerings. Tennessee regulators dismissed that position in their response.

Cointelegraph contacted all three platforms for comment after the letters surfaced. None responded before publication.

Rising tension between states and prediction markets

The Tennessee order follows similar regulatory pressure in other states. Recently, a federal judge paused enforcement of a cease and desist order issued in Connecticut. According to court filings, Kalshi claimed exclusive oversight by federal commodities regulators. The judge temporarily blocked state action while reviewing the dispute.

Despite that pause, Tennessee officials signaled no retreat. They stressed that state law governs gambling activity offered to residents.

From a wider perspective, the move highlights growing friction between states and prediction markets. Regulators appear determined to protect existing sports betting frameworks. Consequently, platforms may face increased pressure to seek licenses or exit regulated states. Tennessee’s action reinforces the escalating scrutiny surrounding sports event contracts.

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