Regulatory Developments in Tennessee: Multiple Prediction Market Platforms Receive Cease and Desist Orders

Regulatory authorities in Tennessee have ordered Kalshi, Polymarket, and a major exchange to cease offering contract trading services related to sports events to Tennessee residents. This decision is based on the companies operating without obtaining the appropriate licenses required by state law.

**Current Business Models and Regulatory Issues**

The targeted companies are registered as designated contract markets by the U.S. Commodity Futures Trading Commission (CFTC) and offer users the opportunity to purchase contracts based on the outcomes of sports events. However, according to Tennessee's Sports Wagering Regulation Act, all businesses accepting bets related to sports events must hold a license issued by state authorities. The State Wrestling Commission (SWC) has indicated that none of the three companies have obtained this state license.

**Legal Evaluation and Violation Determination**

In an official statement, the regulatory authority clarified that "the sports event-related contracts offered... fall under the definition of gambling contracts as defined by state law, and constitute illegal activities in violation of Tennessee laws and regulations." As a result of this determination, the companies face strict legal actions under state law.

**Deadline and Penalty Provisions**

The targeted companies are required to cease all business activities in Tennessee by January 31, cancel all unsettled contracts related to Tennessee residents, and fully refund funds held on behalf of customers. Failure to comply may result in administrative fines of up to $25,000 per violation, and the companies could be charged with promoting gambling, a felony under state law, potentially leading to criminal prosecution.

This measure by Tennessee demonstrates the regulatory authorities' strict oversight of cryptocurrency trading platforms and provides an important signal to the entire industry.