A U.S. federal court has temporarily halted Tennessee’s attempt to force prediction market operator Kalshi to suspend its sports event contracts in the state. The ruling freezes a cease-and-desist order while the court examines whether federal oversight shields the platform from state gambling laws.
The temporary block prevents the Tennessee Sports Wagering Council and the state attorney general from enforcing an order that required Kalshi, along with platforms like Polymarket and Crypto.com, to stop offering sports-related contracts, void open positions, and refund customer deposits by January 31. Noncompliance could have triggered fines of up to $25,000 per offense and potential law enforcement referrals.
Kalshi contends the dispute is a matter of federal versus state jurisdiction. The company argues that Tennessee’s enforcement intrudes on the Commodity Futures Trading Commission (CFTC)’s exclusive oversight of derivatives trading. In its federal complaint, Kalshi cited field and conflict preemption under the Commodity Exchange Act, asserting that state action cannot override CFTC-regulated markets.
Tennessee’s order adds to a growing wave of state challenges targeting sports-based event contracts, following similar actions in Arizona, Illinois, Maryland, Michigan, Montana, Nevada, New Jersey, New York, and Ohio. Courts are divided on whether these markets are regulated derivatives or unlicensed sports betting, creating ongoing legal uncertainty for prediction market operators.
The federal injunction provides Kalshi temporary relief in Tennessee, highlighting the broader tension between state gambling laws and federally regulated derivatives markets, a debate that continues to evolve across the U.S.
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