Tennessee orders Polymarket to cease operations…regulatory clash over prediction markets intensifies
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Summary
- Tennessee said it sent cease-and-desist orders to Polymarket, Kalshi, and Crypto.com’s North American derivatives exchange, demanding they halt operations and issue refunds.
- The three platforms are registered with the CFTC as designated contract markets (DCMs) and have argued that federal rules preempt state gambling regulation, while state governments maintain the products amount to illegal gambling.
- Tennessee’s action is increasing regulatory pressure across the prediction-market industry, with future court rulings and a recalibration of federal and state regulators’ roles emerging as key variables for the market.
The US state of Tennessee has further escalated a regulatory clash surrounding prediction-market platforms.
According to The Block on the 11th (local time), Tennessee’s sports-betting regulator sent formal letters demanding a halt to operations to three major prediction-market platforms, including Polymarket, pushing the conflict between state gambling oversight and federal derivatives regulation into a nationwide issue.
The Tennessee Sports Wagering Council sent cease-and-desist letters to Polymarket, Kalshi, and Crypto.com’s North American derivatives exchange. The council demanded that the three platforms immediately stop offering sports-event contracts to Tennessee residents, void all outstanding contracts entered into by state residents, and refund customer deposits by January 31, 2026.
Mary Beth Thomas, executive director of the Tennessee Sports Wagering Council, wrote in a letter to Polymarket that “the sports-event contracts in question do not meet Tennessee’s consumer-protection standards and pose a significant and immediate threat to the public interest.” Similar language was reportedly included in the letters sent to Kalshi and Crypto.com.
At the heart of the dispute is jurisdiction. All three platforms are registered with the US Commodity Futures Trading Commission (CFTC) as designated contract markets (DCMs), and have argued on that basis that federal regulation preempts state gambling rules. However, courts have issued mixed rulings on that logic, and state governments have maintained that sports-event contracts effectively amount to illegal gambling.
Tennessee’s move is likely to weigh on the prediction-market industry more broadly. As the tug-of-war intensifies between platforms asserting legality under the federal derivatives framework and state governments prioritizing consumer protection and gambling enforcement, future court decisions and the delineation of roles between federal and state regulators are emerging as key variables for the market.
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