Tennessee Sports Wagering Authority Clamps Down on Prediction Markets
In a recent move to regulate online betting activities, Tennessee’s sports betting regulator has issued cease-and-desist orders to leading prediction market platforms—Kalshi, Polymarket, and Crypto.com—barring them from offering sports event contracts to residents within the state. The decision underscores ongoing tensions between federal and state jurisdictions over the legality of emerging betting formats leveraging prediction markets.
The Tennessee Sports Wagering Council (SWC) communicated in letters dated Friday that these platforms engaged in illegal gambling activities by providing sports wagering products without obtaining appropriate licensing under the Tennessee Sports Gaming Act. The platforms list contracts on their North American Derivatives Exchange that allow users to wager on sporting outcomes. The regulator asserts that such products, branded as “event contracts,” do not escape the state's gambling statutes despite their presentation, and are considered illegal offerings if not licensed.
The SWC highlighted concerns over consumer safety measures, including age restrictions, responsible gaming tools, and anti-money laundering frameworks—features currently lacking on these platforms, according to the agency. As part of the enforcement action, the regulator ordered these companies to cease offering sports-related contracts, cancel all existing ones entered into by Tennessee residents, and refund any deposits by January 31, 2026. Failure to comply could lead to fines of up to $25,000 per offense, along with potential legal proceedings and further investigation by authorities.
Both Kalshi and Polymarket operate under federal commodities law with oversight from the US Commodity Futures Trading Commission (CFTC). However, Tennessee officials emphasized that federal regulation does not override the state's authority to regulate sports betting within its boundaries. Crypto.com, primarily a cryptocurrency exchange, is also affected by these orders amid broader scrutiny of prediction markets' legality at the state level.
While the platforms await clarification, the legal landscape remains complex. Notably, Kalshi recently challenged Connecticut’s enforcement actions, gaining a temporary reprieve from a cease-and-desist order issued by state regulators, in a case that highlights wider disputes over the regulation of prediction markets tied to sporting events. Kalshi and other platforms face ongoing legal battles in multiple states—Massachusetts, New Jersey, Nevada, Maryland, and Ohio—where regulators question whether such contracts constitute unlicensed gambling options.
The case illustrates the evolving regulatory environment surrounding prediction markets—an innovative intersection of crypto, betting, and law that continues to develop as regulators seek to adapt to new market realities.
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