Tennessee Orders Kalshi, Polymarket, and Crypto.com to Cease Sports Betting Operations

TLDR:

• Tennessee regulators issued cease-and-desist orders to three prediction markets on Jan. 9, 2025.
• Platforms must halt operations, void contracts, and refund deposits to Tennessee residents by Jan. 31.
• Non-compliance could result in $25,000 civil penalties per violation and potential felony charges.
• Companies argue their CFTC oversight differs from traditional sportsbooks despite state challenges. 

Tennessee regulators have ordered three prediction market platforms to cease sports event contract offerings to state residents. 

The Tennessee Sports Wagering Council issued cease-and-desist letters to Kalshi, Polymarket, and Crypto.com on Jan. 9. 

The firms must halt operations, void existing contracts, and refund deposits by Jan. 31. State officials claim the platforms violated gambling laws despite federal oversight.

State Regulators Challenge Federal Jurisdiction

The Sports Wagering Council contends that sports event contracts constitute illegal wagering under Tennessee law. All three companies operate as designated contract markets registered with the Commodity Futures Trading Commission. 

However, Tennessee’s Sports Gaming Act requires entities accepting sports wagers to hold state licenses. None of the platforms currently possess such authorization.

The regulatory letters state specific violations by the companies operating in Tennessee. “Accordingly, the sports events contracts offered … are Wagers under the Act and are being offered illegally in violation of Tennessee law and regulations,” the letters state. 

The platforms allow users to purchase contracts based on sporting event outcomes. State regulators view this activity as unlicensed sports betting rather than legitimate derivatives trading.

The dispute highlights ongoing tensions between federal and state regulatory frameworks. While the CFTC oversees these platforms at the federal level, states maintain authority over gambling within their borders. 

Tennessee joins other states that have pursued similar enforcement actions against prediction markets.

Compliance Deadline and Potential Penalties

The companies face a Jan. 31 deadline to comply with the cease-and-desist orders. They must terminate all operations involving Tennessee residents during this period. 

Open contracts with state residents require immediate voiding under the directive. Platforms must also return deposits to affected users by the deadline.

Non-compliance carries substantial consequences under Tennessee law. The state can impose civil penalties reaching $25,000 per violation. 

Criminal referrals for aggravated gambling promotion remain possible for continued violations. Such charges constitute felony offenses under state statutes.

Connecticut issued similar orders to Robinhood, Kalshi, and Crypto.com in December. The platforms defended their operations by citing federal CFTC regulation. 

Jack Such, a Kalshi spokesperson, said their offerings are “very different from what state-regulated sportsbooks and casinos offer their customers.” 

The companies maintain their services operate legally under federal derivatives regulations despite state-level challenges.