In brief
- Tennessee ordered Polymarket, Kalshi, and Crypto.com to shut down sports prediction markets and refund wagers.
- The companies have previously said that states lack authority to do so, claiming the markets are federally regulated.
- The escalating legal clash is poised to eventually head to the Supreme Court.
Tennessee’s sports betting regulator has ordered prediction market platforms to stop offering sports-related wagers—in the latest move by state governments to try to seize control of the exploding, legally ambiguous industry.
The Tennessee Sports Wagering Council sent cease-and-desist letters to Polymarket, Kalshi and Crypto.com on Friday, ordering the companies to immediately pull any sports-related markets accessible to Tennessee customers. The companies were also ordered to refund any pending sports-related wagers to customers by the end of the month.
The companies are unlikely to comply. For months, they have insisted that the billions of dollars’ worth of sports-related markets they collectively operate constitute federally regulated events contracts, not state-regulated sports betting.
On Friday, in fact, Kalshi sued Tennessee’s attorney general and its sports betting regulator in federal court, arguing that the state had no legal standing to regulate the company or compel it to stop serving in-state customers. On Monday, the prediction market filed an additional motion for a preliminary injunction and an emergency hearing, in an effort to have a federal judge weigh in immediately.
Other states have made similar moves to try to ban sports-related prediction markets, to no avail. Illinois, Connecticut, Michigan, and Illinois all moved to ban top companies from offering sports prediction markets without complying with state-level gambling regulations, but the companies—Polymarket, Kalshi, and Crypto.com—have all continued to do so.
Representatives for the three companies did not immediately respond to Decrypt’s requests for comment.
The economic calculus of the prediction market industry’s defiance of state-level bans makes some sense. Tennessee’s sports betting regulator, for instance, has threatened to levy fines of up to $25,000 against Polymarket, Crypto.com, and Kalshi for violations of its rules.
In the last year alone, Kalshi has seen over $23.8 billion worth of trading volumes on its sports-related markets, according to data from Dune—a figure constituting over 80% of its total business.
Tennessee’s action against the prediction markets on Friday noted how the companies have failed to institute basic standards required of gambling platforms in the state—including requiring all participants to be over the age of 21, providing self-exclusion lists for gambling addicts, and instituting limits on betting amounts and time spent betting.
As state regulators have pushed in recent months to litigate the jurisdictional questions hanging over prediction markets, the industry’s top players have also proactively filed their own lawsuits on the issue—likely setting up the matter for an eventual Supreme Court evaluation.
Editor’s note: This story was updated after publication to note Kalshi’s court moves.
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