A U.S. federal judge has temporarily halted Tennessee’s bid to force prediction market operator Kalshi to shut down its sports event contracts in the state, freezing a cease-and-desist order while the court considers whether the company’s Commodity Futures Trading Commission-regulated platform is shielded from state gambling laws.
According to the order signed on Monday, the ruling pauses enforcement by the Tennessee Sports Wagering Council and the state attorney general after regulators ordered Kalshi — alongside Polymarket and Crypto.com — to stop offering sports-related contracts to Tennessee residents, void open contracts, and refund customer deposits by Jan. 31. Tennessee officials also initially warned that noncompliance could trigger fines of up to $25,000 per offense and potential referrals to law enforcement.
Kalshi countered that the dispute is a jurisdictional clash between state gaming enforcement and federal commodities law.
In its federal complaint, the company said Tennessee’s move intrudes on the CFTC’s “exclusive jurisdiction” over derivatives trading on designated exchanges and argued that the state’s threatened enforcement is both field-preempted and conflict-preempted by the Commodity Exchange Act.
States tussle with prediction markets
Even before Tennessee’s action, a growing list of states had challenged Kalshi’s sports markets.
A November 2025 legal analysis by law firm Willkie Farr & Gallagher LLP listed nine states — Arizona, Illinois, Maryland, Michigan, Montana, Nevada, New Jersey, New York, and Ohio — as having sent cease-and-desist letters to Kalshi as of that publication date, with Tennessee’s latest order extending the wave of state-level pressure. Authorities in Connecticut also issued cease-and-desist orders to Kalshi, Robinhood, and Crypto.com over “illegal sports wagering.” Notably, Kalshi secured temporary relief in the Connecticut enforcement case as well.
As such, the Tennessee order marked a fresh front in a national fight over whether sports-based event contracts are regulated derivatives or unlicensed sports betting. So far, courts have split on that question.
A federal judge in Nevada ruled in late 2025 that Kalshi must comply with Nevada gaming rules, rejecting the company’s argument that CFTC oversight blocks state regulation of sports-related contracts. Kalshi had previously sued the Nevada and New Jersey gaming boards over cease-and-desist notices, as The Block reported in March.
© 2026 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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