Tennessee's Sports Wagering Council sent formal cease-and-desist letters last week to Kalshi, Polymarket, and Crypto.com, accusing the platforms of running unlicensed sports wagering operations disguised as event contracts.

The orders require the companies to stop offering sports-related contracts to state residents, void all pending contracts, and issue full refunds by January 31.

Tennessee Orders Kalshi, Polymarket, Crypto.com to Stop Sports Betting

Executive Director Mary Beth Thomas wrote in the letters that the platforms' sports event contracts fail to meet state consumer protection requirements and pose “an immediate and significant threat to the public interest of Tennessee.”

All three companies operate as designated contract markets registered with the Commodity Futures Trading Commission (CFTC CFTC The 1974 Commodity Exchange Act (CEA) in the United States created the Commodity Futures Trading Commission (CFTC). The Commission protects and regulates market activities against manipulation, fraud, and abuse trade practices and promotes fairness in futures contracts. The CEA also included the Sad-Johnson Agreement, which defined the authority and responsibilities for the monitoring of financial contracts between the Commodity Futures Trading Commission and the Securities and Exchange Commiss The 1974 Commodity Exchange Act (CEA) in the United States created the Commodity Futures Trading Commission (CFTC). The Commission protects and regulates market activities against manipulation, fraud, and abuse trade practices and promotes fairness in futures contracts. The CEA also included the Sad-Johnson Agreement, which defined the authority and responsibilities for the monitoring of financial contracts between the Commodity Futures Trading Commission and the Securities and Exchange Commiss Read this Term), but Tennessee regulators say federal registration doesn't exempt them from state gambling licensing requirements.

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Under the state's Sports Gaming Act, any entity accepting wagers on sporting events must hold a Tennessee-issued license. None of the three platforms has obtained one.

The council warned that continued operations could trigger civil penalties starting at $10,000 for a first violation and climbing to $25,000 for subsequent offenses. The state also threatened criminal referrals for aggravated gambling promotion, which carries felony charges under Tennessee law.

Prediction Markets Face Growing State Resistance

Tennessee joins at least 10 other states that have taken action against prediction market platforms over the past year. Nevada, Arizona, Illinois, Maryland, New Jersey, Montana, and Ohio previously sent cease-and-desist orders to Kalshi. A federal court in Nevada ruled in November that sports event contracts qualify as gambling, stripping away the platforms' argument that CFTC registration provides federal protection from state enforcement.

Connecticut issued similar orders in December to Robinhood, Kalshi, and Crypto.com, becoming the tenth state to challenge the platforms. Wisconsin's Ho-Chunk Nation also sued Kalshi and Robinhood in August, claiming the platforms violated federal gaming laws and tribal sovereignty.

The Tennessee order appears to be the first state-level enforcement action specifically targeting Polymarket. The platform re-entered the U.S. market last year after acquiring derivatives exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term QCX for $112 million and currently offers only sports-related contracts to American users.

Federal vs State Authority Battle Intensifies

The platforms maintain that CFTC oversight as designated contract markets allows them to operate nationwide regardless of state gambling restrictions. Kalshi has filed federal lawsuits challenging cease-and-desist orders, arguing states lack authority over federally regulated derivatives exchanges. Crypto.com took Nevada to court in June over similar restrictions, claiming the state improperly blocked its federally regulated contracts.

State officials counter that prediction markets drain tax revenue from licensed sportsbooks while bypassing consumer protections like age verification, responsible gaming protocols, and anti-money laundering measures.

Tennessee currently licenses 12 sports betting operators and collected taxes on over $305 million in July 2025 wagers alone. Thomas has said unlicensed offshore and unregulated platforms account for roughly 30% of missing state tax revenue.

What Happens Next?

Tennessee's deadline gives the platforms three weeks to comply or face escalating financial penalties and potential criminal prosecution. Legal experts expect Kalshi to file a federal lawsuit challenging the order, following the company's pattern in other states.

The CFTC recently advised its registered exchanges and clearing organizations to account for state regulatory actions with appropriate contingency planning and risk management procedures.