The Tennessee Sports Wagering Council (SWC) has escalated a nationwide regulatory clash by issuing cease-and-desist letters to three major prediction market platforms: Kalshi, Polymarket, and Crypto.com's North American Derivatives Exchange (Nadex). The letters, dated January 9, 2026, demand the immediate halt of offering sports event contracts to Tennessee residents.
The SWC, led by Executive Director Mary Beth Thomas, argues that the platforms are offering illegal sports wagering without a state license, bypassing critical consumer protections such as age restrictions, responsible gaming tools, and anti-money laundering controls. Thomas stated the contracts "are an immediate and significant threat to the public interest of Tennessee." The regulator ordered the platforms to void all pending contracts for Tennessee users and refund all customer deposits by January 31, 2026.
Failure to comply carries significant penalties. Under the Tennessee Sports Gaming Act, the SWC can impose fines of $10,000 for a first offense, $15,000 for a second, and $25,000 for subsequent violations. More severely, the letters cite state criminal statutes, classifying gambling promotion as a misdemeanor and aggravated promotion as a felony, warning of referrals to law enforcement for investigation.
This action marks the first publicly disclosed state-level cease-and-desist targeting Polymarket, which recently re-entered the U.S. market following its $112 million acquisition of derivatives exchange QCX. All three platforms are federally registered with the Commodity Futures Trading Commission (CFTC) as designated contract markets, a status they argue preempts state gambling laws—a legal position with mixed results in ongoing court battles.
Tennessee's move follows months of opposition. In April 2025, the SWC urged the CFTC to prohibit sports event contracts, and in November, Thomas warned prediction markets threatened state-regulated sportsbooks and their tax revenue for education. The letters were copied to Tennessee Attorney General Jonathan Skrmetti, who has previously joined multi-state legal briefs challenging prediction markets.
As the platforms face a January 31 deadline, attorney Daniel Wallach predicts "lawsuits are imminent," suggesting they will challenge the state's authority in federal court, mirroring Kalshi's ongoing litigation in states like Connecticut, where a judge recently granted a temporary reprieve from enforcement.
