Tennessee has ordered three Commodity Futures Trading Commission (CFTC)-registered platforms to halt sports-linked event contracts for residents, setting up another state-level challenge to claims that federal derivatives oversight allows nationwide operations.
The Tennessee Sports Wagering Council sent formal cease-and-desist letters last week to Kalshi, Polymarket, and Crypto.com, accusing the platforms of running unlicensed sports wagering operations disguised as event contracts. The orders require the companies to stop offering sports-related contracts to state residents, void all pending contracts, and issue full refunds by January 31.
Executive Director Mary Beth Thomas wrote in the letters that the sports event contracts fail to meet state consumer protection requirements and pose “an immediate and significant threat to the public interest of Tennessee.”
State licensing requirement cited
All three companies operate as designated contract markets registered with the CFTC. Tennessee regulators said that federal registration does not exempt the platforms from state gambling licensing rules.
Under the state’s Sports Gaming Act, any entity accepting wagers on sporting events must hold a Tennessee-issued license. The council said none of the three platforms has obtained one.
Tennessee currently licenses 12 sports betting operators. The state collected taxes on more than $305 million in wagers in July 2025 alone.
Penalties and possible criminal referrals
The council warned that continued operations could trigger civil penalties starting at $10,000 for a first violation and rising to $25,000 for subsequent offenses. The state also threatened criminal referrals for aggravated gambling promotion, which carries felony charges under Tennessee law.
Thomas has said that unlicensed offshore and unregulated platforms account for roughly 30% of missing state tax revenue.
State actions against prediction markets
Tennessee joins at least 10 other states that have taken action against prediction market platforms during the past year.
Nevada, Arizona, Illinois, Maryland, New Jersey, Montana, and Ohio previously sent cease-and-desist orders to Kalshi. A federal court in Nevada ruled in November that sports event contracts qualify as gambling.
Connecticut issued similar orders in December to Robinhood, Kalshi, and Crypto.com, becoming the tenth state to challenge the platforms.
Wisconsin’s Ho-Chunk Nation also sued Kalshi and Robinhood in August, alleging the platforms violated federal gaming laws and tribal sovereignty.
The Tennessee order appears to be the first state-level enforcement action specifically targeting Polymarket. The platform re-entered the US market last year after acquiring derivatives exchange QCX for $112 million and currently offers only sports-related contracts to American users.
Federal oversight vs state enforcement
The platforms maintain that CFTC oversight, as designated contract markets, allows them to operate nationwide regardless of state gambling restrictions.
Kalshi has filed federal lawsuits challenging cease-and-desist orders, arguing states lack authority over federally regulated derivatives exchanges. Crypto.com took Nevada to court in June over similar restrictions, claiming the state improperly blocked its federally regulated contracts.
The CFTC recently advised its registered exchanges and clearing organizations to account for state regulatory actions with appropriate contingency planning and risk management procedures.
Tennessee’s deadline gives the platforms three weeks to comply or face escalating financial penalties and potential criminal prosecution.
Legal experts expect Kalshi to file a federal lawsuit challenging the Tennessee order, consistent with the company’s approach in other states, according to the article.
Original article: https://www.yogonet.com/international/news/2026/01/12/117070-tennessee-targets-cftcregistered-platforms-over-sportslinked-event-contracts
