Tennessee regulators have ordered Kalshi, Polymarket, and Crypto.com to cease operations related to sports contracts, accusing them of violating state gambling laws.
These companies are now facing the risk of contract nullifications and deposit returns to users. Failure to comply could lead to criminal referrals and heavy fines.
Regulatory Orders and Sanctions
On January 9, the Tennessee Sports Wagering Council (SWC) issued letters to Kalshi, Polymarket, and Crypto.com, demanding they stop offering sports-related contracts in the state. The companies are required to nullify open contracts and return user deposits by January 31.
The SWC has warned that non-compliance could result in criminal referrals for aggravated gambling promotion and civil penalties of up to $25,000 per violation. The Tennessee Sports Gaming Act permits fines for unlicensed wagering, escalating to $25,000 for multiple infractions.
The SWC’s action challenges the operations of these platforms, which are regulated by the Commodity Futures Trading Commission (CFTC). Despite this federal oversight, Tennessee law requires a state-issued license for organizations offering wagers on sporting events. Kalshi, Polymarket, and Crypto.com do not hold such licenses, leading the SWC to label their contracts as illegal under state law.
Other States Take Similar Actions
Tennessee’s move follows similar actions from other states. In December, Connecticut issued cease-and-desist orders against Kalshi, Crypto.com, and Robinhood. The Connecticut Department of Consumer Protection accused the platforms of unauthorized online gambling and violations related to consumer protections.
The department’s Gaming Director, Kris Gilman, stressed the risks posed by these platforms, warning that prediction markets offer no guarantees for consumer funds or data.
Kalshi has faced scrutiny in other states as well, including Arizona, Illinois, and Nevada. In April 2025, Illinois regulators ordered Kalshi to halt its sports betting prediction markets, citing violations of state law.
Similarly, Arizona’s Department of Gaming issued cease-and-desist notices to Kalshi and Crypto.com in May, calling their event contracts illegal.
Increasing Scrutiny of Prediction Markets
Despite being regulated under federal derivatives law, the platforms face increasing resistance from state regulators. While companies like Kalshi and Polymarket argue they operate legally within their regulatory framework, state authorities have consistently claimed these markets breach local gambling rules.
The push for stricter oversight of online prediction markets is gaining momentum across the U.S., as more states assert control over sports betting and related services.
Polymarket, which reentered the U.S. market after acquiring QCX, is also seeing rising market activity. However, this growth is being shadowed by ongoing legal disputes and regulatory challenges.
The company’s recent launch of its U.S. app to waitlisted users has further fueled interest, although it remains unclear how the regulatory landscape will evolve.
The crackdown in Tennessee represents a broader trend of increasing regulatory scrutiny over online gambling platforms. As regulators push for state licenses and enforce stricter consumer protection laws, companies like Kalshi, Polymarket, and Crypto.com may face a growing legal battle. The outcome of these actions will shape the future of prediction markets and sports betting in the U.S.
