Tennessee judge grants preliminary injunction blocking state enforcement against Kalshi

Prediction markets platform Kalshi has obtained a preliminary injunction in Tennessee, blocking state officials from enforcing local betting laws against the platform’s sports-related event contracts.

In the Thursday decision, U.S. District Judge Aleta A. Trauger sided with Kalshi on key issues, concluding that the firm is likely to succeed in arguing its sports event contracts qualify as swaps under the Commodity Exchange Act.

The injunction applies to individual state officials, preventing them from enforcing Tennessee’s sports gaming laws against Kalshi while litigation continues.

Kalshi, a Commodity Futures Trading Commission-regulated platform, offers binary event contracts that let users bet on outcomes such as Supreme Court decisions, weather events, and sports results.

Dozens of U.S. states have challenged sports event contracts on Kalshi and similar platforms, claiming they violate state laws against unlicensed sports wagering. Kalshi has been arguing that its contracts fall under exclusive federal jurisdiction as swaps under federal commodities law, preempting state gambling regulations.

Tennessee state regulators had sent Kalshi a cease-and-desist letter threatening enforcement for operating without a state license under the Tennessee Sports Gaming Act. In response, Kalshi filed suit last month, seeking declaratory and injunctive relief.

Outcome and occurrence

While Tennessee authorities have been saying that Kalshi’s contracts depend on the “outcome” of a sports game rather than the “occurrence” of an event as stipulated in the law, Judge Trauger ruled that “the outcome of an event can be an occurrence, too.”

On the CEA’s requirement that swaps must be associated with a potential financial or economic consequence, the judge accepted Kalshi’s argument that “downstream consequences” of sports game outcomes suffice — such as boosted merchandise sales after a team victory.

The court further ruled that Kalshi cannot simultaneously comply with state licensing and CFTC rules, and doing so would frustrate the uniform federal regulation of derivatives markets.

Appellate litigator Andrew Kim, commenting on the decision on X, noted the divergence from other rulings.

“Departing from Judge Gordon’s ruling in Nevada, Judge Trauger holds that Kalshi’s event contracts are swaps,” Kim wrote. “Reasonable minds are going to differ on these questions, which is why we’re probably heading to [The Supreme Court].”

This Tennessee decision adds to a patchwork of outcomes in similar disputes. District courts in Maryland and Nevada have denied Kalshi injunctions, while New Jersey granted one. Motions remain pending in Ohio, New York, and Connecticut.

Earlier this week, the CFTC filed an amicus brief in the Ninth Circuit Court of Appeals in a related case involving Crypto.com and Nevada, asserting its “exclusive jurisdiction” over prediction markets and event contracts as commodity derivatives.

Meanwhile, Kalshi remains the largest prediction market exchange in terms of volume, processing over $9.5 billion in January, according to The Block’s data dashboard.