Tennessee became the ninth state to order prediction market platforms to cease sports betting operations.
The Tennessee Sports Wagering Council sent cease-and-desist letters January 9 to Kalshi, Polymarket and Crypto.com.
Kalshi filed a federal lawsuit the same day.
Platforms must refund Tennessee users by January 31 or face $25,000 fines per violation.
What Happened
Tennessee's sports betting regulator accused the platforms of operating unlicensed gambling without required consumer protections.
The state cited missing safeguards including age verification requiring users be 21, self-exclusion lists, and betting limits.
Tennessee Attorney General Jonathan Skrmetti backed the action after joining 37 attorneys general supporting Maryland's Kalshi lawsuit.
All three platforms operate as CFTC-registered designated contract markets, arguing federal oversight preempts state law.
A federal judge temporarily blocked Connecticut from enforcing similar orders against Kalshi in December.
Oral arguments in Connecticut are scheduled for February 12.
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Why It Matters
Kalshi generated $23.8 billion in trading volume during 2025, with sports representing the dominant category.
The platforms face enforcement in nine states including Connecticut, Nevada, Maryland, Massachusetts, New York, New Jersey, Arizona, Illinois and Ohio.
Legal observers expect the jurisdictional dispute to reach the Supreme Court.
The outcome will determine whether federally regulated prediction markets can operate nationwide or must obtain state gambling licenses.
State licensing requirements would fragment user bases and eliminate the business model built on national liquidity.
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