Kalshi Wins Temporary Court Order Against Tennessee Regulators
What Did the Court Decide?
A federal judge in Tennesview has temporarily blocked state regulators from taking action against Kalshi, the federally regulated prediction markets platform, granting the company a key procedural win in its fight over sports-related event contracts.
On Monday, U.S. District Judge Aleta Trauger issued a temporary restraining order preventing the Tennesview Sports Wagering Council from enforcing a cease-and-desist letter it sent to Kalshi last week. The order pauses the regulator’s demands that Kalshi stop offering sports event contracts in the state, void existing contracts, and refund users by Jan. 31.
In her ruling, Trauger said Kalshi “will suffer irreparable injury and loss” if the state’s actions move forward and found that the company is “likely to succeed on the merits of its claims” unless the regulator is restrained. She also scheduled a hearing on Kalshi’s request for a preliminary injunction, which will determine whether the freeze remains in place while the lawsuit continues.
Until that hearing, Kalshi is free to keep operating in Tennesview.
Investor Takeaway
Why Is Tennesview Targeting Kalshi and Other Platforms?
The dispute began Friday, when the Tennesview Sports Wagering Council sent cease-and-desist letters to Kalshi, Polymarket, and Crypto.com. The regulator accused all three platforms of offering unlicensed sports wagering products and warned of penalties of up to $25,000 per violation.
The council ordered the platforms to halt operations tied to in the state, cancel outstanding positions, and return funds to Tennesview users. The move reflects growing pressure from state gambling authorities that view prediction markets tied to sporting outcomes as falling within their licensing regimes.
Kalshi responded within days by filing suit against the council, its chair William Orgen, executive director Mary Beth Thomas, and Tennesview attorney general Jonathan Skrmetti. The company argues the state lacks authority to regulate its products.
How Is Kalshi Defending Its Business Model?
Kalshi’s central claim is jurisdictional. The company is a federally designated derivatives platform and says it operates under the exclusive authority of the . According to Kalshi, Congress granted the CFTC sole power to on registered platforms, leaving no room for state-level gambling enforcement.
“Tennesview’s intent to regulate Kalshi intrudes upon the federal regulatory framework that Congress established for regulating derivatives on designated platforms,” the company said in its lawsuit.
Kalshi’s contracts allow users to trade on the outcome of real-world events, including economic data, elections, and sports. The firm has long argued that these products resemble rather than wagers and therefore belong within the federal commodities framework.
That position has gained partial support in other courts. Judges in Nevada and New Jersey have blocked state regulators from enforcing similar cease-and-desist orders while lawsuits proceed. In Maryland, however, a judge declined to grant Kalshi temporary relief, showing that the legal landscape remains uneven.
Investor Takeaway
Why Does This Case Matter Beyond Tennesview?
The clash highlights a growing fault line between federal market regulation and state gambling enforcement as prediction markets expand beyond niche financial use cases. Sports-related contracts, in particular, blur the boundary between derivatives trading and traditional betting.
For state regulators, the concern centers on consumer protection and licensing parity with sportsbooks. For platforms like Kalshi, the risk lies in fragmented enforcement that could force them to tailor products state by state or withdraw entirely from certain markets.
The case also lands amid broader scrutiny of event-based contracts. While the to operate, it has faced pressure from lawmakers and state officials to clarify how far prediction markets can go, especially when contracts mirror outcomes already covered by regulated betting frameworks.
What Happens Next?
Tennesview’s enforcement action remains frozen until the preliminary injunction hearing scheduled for Jan. 26. At that stage, the court will decide whether the state can resume its actions while the lawsuit plays out or whether Kalshi can continue operating without interference.
A ruling in Kalshi’s favor would strengthen the company’s position in other state disputes and reinforce the idea that federally regulated event contracts sit outside state gambling laws. A loss would give states more leverage to restrict prediction markets tied to sports.
