Tennessee Targets Kalshi, Polymarket and Crypto.com in Sweeping Sports Betting Probe
Regulators draw a line in the digital sand.
Tennessee's financial watchdogs just launched a multi-front investigation into three major crypto-native platforms—Kalshi, Polymarket, and Crypto.com. The focus? Their potential involvement in sports betting markets, a legal gray area that's heating up as digital assets collide with traditional gambling laws.
The Core Conflict: Prediction vs. Gambling
At the heart of the probe is a fundamental question: when does a market prediction contract become a sports bet? Platforms like Polymarket have long argued they offer information markets, not gambling—a distinction that regulators are now scrutinizing with fresh, skeptical eyes. Crypto.com's inclusion suggests the net is cast wide, examining everything from dedicated prediction markets to broader exchange offerings.
A Signal to the Industry
This isn't just about three companies. It's a shot across the bow for the entire crypto sector, signaling that state regulators are actively mapping the new terrain of decentralized finance onto old legal frameworks. The move highlights the persistent regulatory ambiguity that innovative platforms navigate—or sometimes, opportunistically exploit. After all, what's a little regulatory arbitrage between friends?
The outcome could set a precedent, forcing a clearer separation between financial innovation and outright wagering. For an industry built on bypassing gatekeepers, the ultimate check might just be the long arm of state law.
Tennessee challenges CFTC-regulated platforms over unlicensed sports contracts
If it's Friday, it must be Tennessee issing cease-and-desist orders against @Kalshi, @Polymarket and @cryptocom https://t.co/rmUzOhoTE8
— Bill Speros (@billsperos) January 10, 2026
The Tennessee Sports Wagering Council (SWC) accused all three companies of unlawfully selling sports wagering goods under the pretense of event contracts.
The companies are currently registered as designated contract markets with the Commodity Futures Trading Commission (CFTC), allowing consumers to purchase contracts based on the results of sporting events. However, any organization that takes bets on athletic events is required to have a state-issued license under Tennessee’s Sports Gaming Act.
The SWC said none of the three firms has one. Accordingly, the letters declare that the contracts offered for sporting events constitute wagers under the Act and are being sold illegally in violation of Tennessee law and regulations.
In the letter to Polymarket, SWC Executive Director Mary Beth Thomas stated, “The sports event contracts offered on Polymarket’s exchange are not compliant with these Tennessee state consumer protections and many others and are an immediate and significant threat to the public interest of Tennessee.” The language used in the letters to Crypto.com and Kalshi was almost identical.
Market activity on Kalshi and Polymarket continues to rise, despite the persistence of legal disputes. Polymarket reentered the U.S. market after acquiring derivatives exchange and clearinghouse QCX for $112 million during the summer. In December, it started making its U.S. app available to waitlisted users, though the firm hasn’t made a public relaunch.
States intensify crackdown on prediction markets despite federal oversight
States have frequently pursued these platforms, even though they operate lawfully under federal derivatives legislation.
In December of last year, Cryptopolitan reported that Connecticut issued three cease-and-desist orders against Crypto.com, Kalshi, and Robinhood.
The Department of Consumer Protection (DCP) Commissioner Bryan T. Cafferelli ordered the platforms to immediately cease advertising, marketing, offering, or otherwise making available contracts or any other type of unauthorized online gaming to Connecticut citizens. Cafferelli accused Kalshi, Crypto.com, and Robinhood of conducting unlicensed online gambling, more specifically, sports wagering.
Cafferelli claimed that even if they were licensed, their contracts WOULD violate several other state rules and regulations, including those that prohibit anyone under the age of 21 from gambling.
“These platforms are operating outside of a regulatory environment, posing a serious risk to consumers who may not realize that wagers placed on these illegal platforms offer no protection for their money or information. A prediction market wager is not an investment.”
–Kris Gilman, Gaming Director, DCP.
In another Cryptopolitan report, Kalshi encountered similar enforcement actions in other states last year, including Arizona, Illinois, Montana, Nevada, New Jersey, Maryland, and Ohio.
On April 3, Illinois casino authorities ordered Kalshi to stop offering sports betting prediction markets. Kalshi’s contracts, according to Illinois casino officials, amount to unlawful sports betting under state law.
Arizona’s gambling authority joined the state-by-state campaign against prediction markets on May 22 in response to the event contracts of Kalshi and others for sports and other markets. Kalshi and Crypto.com received a cease-and-desist notice from the Arizona Department of Gaming (ADG).
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