Tennessee Sends First State-Level Cease-and-Desist to Polymarket Over Sports Contracts

Tennessee regulators have issued cease-and-desist letters to Polymarket, Kalshi, and Crypto.com, ordering them to stop offering sports event contracts to state residents according to reports.

The Tennessee Sports Wagering Council (SWC) claims that the platforms operate without a state license and fail to comply with Tennessee gambling laws, including consumer protections and tax obligations as stated. The regulator gave the companies until January 31 to void existing contracts and refund customer deposits according to the order.

The action marks the first publicly known state-level cease-and-desist against Polymarket, which re-launched in the U.S. in late 2025 according to reports. Tennessee is the ninth state to take enforcement action against prediction market platforms as noted.

Why the Move Happened

Tennessee regulators argue that the sports event contracts offered by the platforms meet the statutory definition of sports wagering under state law according to the regulator. The SWC states that any entity accepting wagers on sporting events must hold a state license, which none of the three platforms possess as reported.

The regulator also cited Tennessee's Sports Gaming Act, which mandates compliance with age restrictions, responsible gaming requirements, and anti-money laundering controls according to the council. SWC Executive Director Mary Beth Thomas stated that the contracts represent an immediate threat to public interest as she explained.

The Tennessee Sports Wagering Council has previously urged the CFTC to prohibit sports event contracts, warning of risks to state-regulated sportsbooks and education funding according to their statement.

How Markets Responded

Kalshi and Polymarket continue to see growing volume, despite the legal challenges as market data shows. Polymarket re-entered the U.S. market after acquiring QCX, a derivatives exchange, for $112 million in 2025 as reported.

The platforms have historically responded to similar state actions by challenging enforcement in federal court according to legal analysis. Tennessee's cease-and-desist letters were copied to Attorney General Jonathan Skrmetti, who has previously supported lawsuits against prediction markets as documented.

Tennessee's action could set a precedent for other states, as similar cease-and-desist orders have been issued in Arizona, Illinois, Maryland, and others according to industry observers.

What Analysts Are Watching

The outcome of these legal battles will clarify whether federal CFTC oversight preempts state gambling regulations as analysts note. The platforms have previously faced mixed results in federal courts, with some rulings favoring their position.

The SWC's letters also mention potential criminal charges if the platforms fail to comply, including Class B misdemeanor charges for gambling promotion and felony charges for aggravated violations according to the regulatory order.

Legal experts are watching for how Tennessee's approach, especially its criminal statutes, will influence future enforcement and potential federal court decisions as legal experts observe.

Analysts note that Tennessee's enforcement action reflects a broader regulatory trend, as states increasingly seek to control how wagers are defined and taxed according to industry analysis.