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Tennessee regulators formally moved against prediction markets last week, and Kalshi answered with litigation the same day. The dispute centers on whether state sports betting regulators can police contracts that Kalshi argues fall under federal derivatives law.
Court filings, regulator statements, and prior lawsuits show a familiar pattern now playing out again, with Tennessee becoming the latest testing ground.
Good to Know
The Tennessee Sports Wagering Council issued cease and desist orders on Friday to Kalshi, Polymarket, and Crypto.com.
Regulators alleged that the platforms offered products that violate state law governing sports wagering and related activity. The orders required the companies to halt operations involving Tennessee residents.
Kalshi responded within hours.
Kalshi filed its lawsuit in the United States District Court for the Middle District of Tennessee. The complaint challenges state authority rather than contesting individual contracts.
The filing states the lawsuit “challenges the State of Tennessee’s intrusion into the federal government’s exclusive authority to regulate derivates trading on exchanges overseen by the Commodity Futures Trading Commission.”
Kalshi asked the court for a preliminary injunction and requested an emergency hearing. The company also sought a temporary restraining order, which the Tennessee District Court granted, stopping enforcement while the case proceeds.
Kalshi maintains that event contracts traded on its exchange fall under the oversight of the Commodity Futures Trading Commission, not state sports betting regulators.
Emails referenced in court documents show that Kalshi attempted to avoid enforcement before the cease and desist order landed. Weeks earlier, a company representative contacted Lacey Mase, Chief Deputy Attorney General of Tennessee, seeking a discussion.
One email stated:
“Kalshi has had productive discussions with authorities in a number of other states, several of which have opted to take a wait-and-see approach the current litigation plays out.”
The outreach came through Robert E. Cooper Jr., former Attorney General of the State of Tennessee, acting on behalf of Kalshi.
The Attorney General office declined. In a Sunday email response, the office wrote, “We will not be staying enforcement pursuant to your request.”
Days later, the cease and desist order followed.
Tennessee now becomes the sixth state where Kalshi has sued regulators in federal court. Prior cases involve Nevada, New Jersey, Maryland, New York, and Connecticut.
Each case follows a similar structure. States issue cease and desist orders tied to gambling laws. Kalshi responds by asserting federal jurisdiction over derivatives markets.
More filings appear likely if additional states pursue enforcement.