Tennessee regulators have issued cease-and-desist orders to three major platforms—Kalshi, Polymarket, and Crypto.com—demanding they immediately stop offering sports-related betting contracts within the state. The platforms have until January 31, 2026, to refund all affected users, marking a significant regulatory action in the growing prediction market sector.
Tennessee has become the latest battleground in the ongoing debate over prediction markets and sports betting, with state regulators targeting three prominent platforms in a coordinated enforcement action. The Tennessee Department of Financial Institutions has ordered Kalshi, Polymarket, and Crypto.com to cease all sports-related betting contracts and provide full refunds to state residents by January 31, 2026.
The regulatory crackdown highlights the complex legal landscape surrounding prediction markets, which have exploded in popularity over the past year. While these platforms argue they offer legitimate forecasting tools based on collective wisdom, regulators increasingly view sports-related contracts as unlicensed gambling operations that circumvent established betting frameworks.
Kalshi, a CFTC-regulated prediction market, has positioned itself as a legal alternative to traditional gambling by framing its offerings as event contracts. Polymarket, operating on blockchain technology, gained significant attention during the 2024 election cycle. Crypto.com, primarily known as a cryptocurrency exchange, has expanded into various financial products including prediction markets.
Tennessee's action appears rooted in the state's existing sports betting laws, which require proper licensing and oversight. The state legalized sports betting in 2019 but maintains strict controls over who can offer such services. Regulators likely determined that these prediction market contracts constitute sports betting under state law, regardless of how the platforms categorize them.
The extended deadline of January 2026 for refunds suggests regulators are providing substantial time for compliance, potentially anticipating legal challenges or complicated withdrawal processes. This timeline also allows users to close positions without immediate forced liquidations.
This enforcement action could signal broader regulatory scrutiny of prediction markets nationwide. Other states may follow Tennessee's lead, particularly as these platforms have grown rapidly without clear regulatory frameworks. The incident underscores the ongoing tension between financial innovation and consumer protection, with regulators working to apply existing laws to emerging technologies.
For the affected platforms, this represents both a short-term setback and a longer-term challenge in navigating the patchwork of state-level regulations governing their operations. The outcome may ultimately depend on whether courts view these products as gambling, financial instruments, or something entirely new requiring fresh legislation.