Tennessee orders Kalshi and others to cease unauthorized betting contracts

Tennessee regulators have issued cease-and-desist orders to Kalshi, Polymarket, and Crypto.com, mandating them to halt sports betting operations within the state. The Tennessee Sports Wagering Council (SWC) claims these companies violated state gambling laws by failing to secure proper licensure for their activities.

Allegations of Unlicensed Gambling

According to the SWC, the platforms presented their sports wagering products as "event contracts", but under Tennessee’s Sports Gaming Act, such offerings qualify as wagers. The council stated in its letters dated January 9, "Accordingly, the sports events contracts offered … are Wagers under the Act and are being offered illegally in violation of Tennessee law and regulations."

The three firms operate under federal registration with the Commodity Futures Trading Commission (CFTC) as designated contract markets. However, Tennessee law requires a state-issued license for any entity accepting sports wagers, which the SWC argues these companies have failed to obtain.

Compliance Deadline Set for January 31

The SWC has directed Kalshi, Polymarket, and Crypto.com to cease all Tennessee-based operations by January 31. This includes shutting down services, refunding all deposits made by state residents, and voiding any existing contracts involving Tennessee users. Failure to meet these requirements could result in severe penalties, including civil fines of up to $25,000 per violation. The council has also indicated that non-compliance could lead to criminal referrals for aggravated gambling promotion, a felony under state law.

Broader Context of Regulatory Action

While the platforms argue that their operations comply with federal derivatives laws, Tennessee’s move highlights ongoing tensions between state and federal oversight. This is not the first instance of state-level enforcement against similar platforms. In December, Connecticut issued a series of cease-and-desist orders to Kalshi, Robinhood, and Crypto.com, raising similar concerns about unlicensed gambling.

Jack Such, a spokesperson for Kalshi, previously defended the platform’s offerings, stating they are "very different from what state-regulated sportsbooks and casinos offer their customers." Despite this defense, Kalshi, Polymarket, and Crypto.com have not responded to requests for comment regarding the Tennessee orders.

Potential Consequences

The regulatory action in Tennessee underscores the challenges companies face when navigating differing state and federal frameworks in the increasingly complex world of sports wagering and event contracts. With civil and potentially criminal penalties on the line, the companies have less than three weeks to comply with the SWC's directives or face further enforcement actions.

As the January 31 deadline approaches, all eyes will be on how these platforms respond to Tennessee's stringent demands and whether this regulatory push will spark broader scrutiny across other states.

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