The Tennessee Sports Wagering Council (SWC) has issued cease-and-desist orders to prediction market heavyweights Polymarket, Kalshi, and Crypto.com, mandating they stop offering sports-related contracts to state residents immediately. The regulator has set a strict deadline of January 31, 2026, for the platforms to void all pending wagers and refund users.
This directive marks the latest escalation in a state-level offensive against federally regulated prediction markets. While Kalshi and Crypto.com operate under Commodity Futures Trading Commission (CFTC) oversight, Tennessee officials explicitly rejected the “derivatives” classification. In the letters, first reported by legal analyst Daniel Wallach, the SWC categorized these contracts as unlicensed “wagers” under the Tennessee Sports Gaming Act.
The Regulatory Hammer
The SWC’s language was absolute. The regulator declared the platforms’ operations an “immediate and significant threat to the public interest,” citing the lack of age verification and consumer protections required of licensed sportsbooks. Unlike previous warnings, this order requires a complete unwinding of positions:
“The SWC demands that Kalshi cease offering sports events contracts to customers in Tennessee immediately, void all pending sports events contracts… and refund all funds on deposit… no later than January 31, 2026.”
The market reaction was muted but visible. Cronos (CRO), the native token of Crypto.com, traded sideways at $0.10 (-0.8%) following the news, as volume softened across centralized exchange tokens. While Polymarket operates on Polygon and has no direct token, the order threatens its liquidity depth in a key U.S. jurisdiction.
State vs. Federal Jurisdiction
Tennessee’s move ignores the “federal preemption” defense currently being litigated in courts. Kalshi and Crypto.com maintain that their CFTC licenses shield them from state gambling laws. A legal shield that held up in a recent Nevada injunction but failed in Maryland. By enforcing a hard exit date, Tennessee is forcing the platforms to either geo-block the state or file an emergency injunction to stay the order.
This crackdown aligns with a broader aggressive stance from Tennessee Attorney General Jonathan Skrmetti, whose office recently shuttered nearly 40 illegal sweepstakes casinos. The state is systematically closing loopholes for any operator resembling a gambling house without a license.
The platforms have until the end of the month to comply or face potential civil lawsuits and criminal penalties.
