The courtroom clash between prediction markets and state gambling regulators has resulted in another round of developments. A federal judge in Tennessee granted Kalshi breathing room this week, halting state actions that threatened to shut down the platform’s sports betting contracts.
Judge Aleta Trauger issued a temporary restraining order on Monday against the Tennessee Sports Wagering Council and Attorney General Jonathan Skrmetti. The decision permits Kalshi to continue operating in the state during the ongoing legal battle, with a preliminary injunction hearing scheduled for January 26.
State Regulators Target Multiple Platforms
Last Friday, Tennessee regulators sent cease-and-desist letters to Kalshi, Polymarket, and Crypto.com. The Sports Wagering Council told these companies to immediately stop offering sports event contracts, cancel existing agreements, and pay back deposits to users by January 31. Companies that don’t comply could face fines of up to $25,000 per violation for operating without proper state licenses.
Federal Jurisdiction Becomes Key Defense
Kalshi quickly responded by filing suit against council officials William Orgen and Mary Beth Thomas. The company argues that federal law supersedes state authority because the Commodity Futures Trading Commission has exclusive oversight of federally designated derivatives exchanges. This argument has worked in Nevada and New Jersey courts, though Maryland rejected it.
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As the case moves forward, the court’s ruling could set an important precedent for how prediction markets intersect with state sports betting laws. A decision in Kalshi’s favor would likely limit states’ ability to regulate federally approved platforms. For now, the temporary restraining order gives Kalshi—and similar companies—a brief but critical reprieve as the legal questions are weighed.
