TLDR:
- The Tennessee Sports Wagering Council issued cease-and-desist letters to Polymarket, Kalshi, and Crypto.com.
- Kalshi has responded with a federal lawsuit against the state, alleging a lack of legal jurisdiction.
- Platforms argue they operate federally regulated event contracts, not state-level gambling.
The state of Tennessee has launched a regulatory offensive against the digital betting sector. The state’s Sports Wagering Council has ordered the industry’s leading platforms, including Polymarket, Kalshi, and Crypto.com, to immediately stop offering sports prediction markets to its citizens.
The measure demands the closure of these contracts, as well as the full refund of any pending wagers before the end of the month, under the threat of fines up to $25,000.
The state regulator contends that these platforms operate without the required gambling licenses and fail to implement basic consumer protection standards, such as age verification (21+), self-exclusion lists for gambling addicts, and limits on betting amounts or time spent.
However, this move faces an industry that defends its technical nature; the companies maintain that their products are event contracts regulated at the federal level by the CFTC and not traditional betting subject to state laws.
Kalshi Responds with Federal Lawsuit and Seeks Injunction
In response to Tennessee’s offensive, the market reacted immediately. Kalshi filed a lawsuit in federal court against Tennessee’s Attorney General and the wagering regulator, arguing that the state lacks the legal authority to interfere with its operations.
With over $23.8 billion in transaction volume linked to sports prediction markets in the last year—representing 80% of its business—the company has requested an emergency hearing to halt the state order.
This conflict in Tennessee is not an isolated case, as states like Illinois and Michigan have attempted similar bans without success. While state regulators try to regain control of an exploding industry, platforms like Polymarket and Crypto.com continue to operate under the argument of legal ambiguity.
In summary, this confrontation suggests that the future of sports prediction markets in the United States could ultimately be decided by the Supreme Court, setting a critical precedent on whether these digital assets are federal financial instruments or simple state wagers.
