Tennessee Regulator Sends Cease-And-Desist Letters To Polymarket, Kalshi, Crypto.com — Details

Tennessee’s sports betting regulator has ordered Polymarket, Kalshi, and Crypto.com to cease offering sports betting contracts, bringing focus to the regulatory landscape of event contract exchanges. The agency accused the three major prediction market platforms of violating state gambling laws by operating in Tennessee without the required licenses.

Polymarket, Others Threatened With Fines For Offering Sports Event Contracts

On Friday, January 9, the Tennessee Sports Wagering Council (SWC) issued cease-and-desist letters to Polymarket, Kalshi, and Crypto.com’s Derivatives Exchange. In the letters, the state regulator asked all three prediction market firms to stop offering sports event contracts to the residents of Tennessee.

The state’s SWC also demanded that the three firms void all pending contracts entered into by Tennessee residents, and refund all customer deposits by January 31, 2026.

SWC Executive Director, Mary Beth Thomas, wrote in the letter to Polymarket:

The sports events contracts offered on Polymarket’s exchange are not compliant with these [Tennessee state consumer] protections (and many others) and are an immediate and significant threat to the public interest of Tennessee.

The language in the Tennessee Sports Wagering Council letters to Kalshi and Crypto.com was quite similar to Polymarket’s cease-and-desist letter. This comes despite all three platforms being registered as designated contract markets with the Commodity Futures Trading Commission (CFTC), allowing them to offer event-based derivatives contracts nationwide.

Despite this CFTC designation, these prediction market firms have had regulatory run-ins with different states in the US. In December 2025, the state of Connecticut sent a trio of cease-and-desist orders to Robinhood, Kalshi, and Crypto.com. The firms based their defense at the time on receiving the CFTC’s approval to operate in the United States.

This Tennessee cease-and-desist order seems to be the first state-level regulatory issue faced by Polymarket, which currently only offers sports event contracts in the United States. In the letters, the Tennessee Sports Wagering Council threatened a range of penalties for any of the firms’ failure to comply.

One of the letters further read:

Failure to comply with the SWC’s demand will result in the imposition of fines pursuant to the Act, which states that the SWC shall impose a fine against any person offering wagers in Tennessee without a license in the amount of $10,000 for the first offense; $15,000 for a second offense; and $25,000 for a third or subsequent offense. ‘ Moreover, failure to comply with the SWC’s demand will result in the SWC seeking injunctive relief.

Prediction Markets Facing Increased Regulatory Scrutiny

The prediction markets, which gained prominence during the 2024 US elections, have continued to enjoy interest from users and institutional investors. However, the regulatory scrutiny faced by the industry has seen a similar surge lately.

For instance, a Polymarket trader reportedly netted record gains of over $400,000 from predicting the recent US military action in Venezuela, prompting talks of introducing a bill to prevent insider trading. As Bitcoinist reported, Rep. Ritchie Torres (D-N.Y.) plans to introduce a bill that would ban all government-affiliated individuals from participating in state-related events in the prediction market.