Tennessee just threw a grenade into the prediction markets party. State regulators have ordered Kalshi, Polymarket, and Crypto.com to stop offering sports-related prediction contracts to Tennessee residents, with full shutdowns and refunds required by the end of January. The prediction market war just got another front.

The Quick Hit

• What happened: Tennessee regulators ordered three prediction market platforms to cease sports contracts
• The damage: Kalshi, Polymarket, and Crypto.com must shut down and issue refunds by month's end
• Why you should care: Prediction markets argue they're federally regulated derivatives, not state-licensed gambling
• The move: This could end up in court—Tennessee may be the next prediction market battlefield

The Regulatory Hammer

Tennessee sports betting regulators aren't messing around. They've determined that sports-related prediction contracts—things like "Will the Chiefs win the Super Bowl?"—constitute gambling under state law and therefore require proper licensing.

The platforms disagree. Kalshi, in particular, has argued that prediction markets are federally regulated derivatives that fall under CFTC jurisdiction, not state gambling commissions. They won that argument in federal court last year regarding political event contracts. Sports contracts? Different story.

The order requires:

• Immediate cessation of new sports contract sales to Tennessee residents
• Full refunds to existing Tennessee account holders
• Complete shutdown of sports-related services by January 31, 2026

Part of a Larger War

This isn't happening in a vacuum. The prediction markets landscape has exploded with over 20 lawsuits currently active nationwide. State regulators, traditional sportsbooks, and prediction market operators are all fighting over who gets to take your money.

Traditional sportsbooks like DraftKings and FanDuel have pushed hard against prediction markets, arguing they're essentially unlicensed bookmakers. The prediction market companies counter that they're financial instruments, not gambling products. Courts have split on the issue depending on the specific product type.

Tennessee's action follows similar moves in other states, but the sports-specific focus is notable. The state has legal sports betting through licensed operators—they're not anti-gambling. They just want their cut.

What This Means for Degenerates

If you're in Tennessee and you've been using Kalshi or Polymarket for sports-adjacent contracts, you'll need to close those positions and get your money back. The platforms will be reaching out with refund details.

The broader question is whether prediction markets can exist alongside traditional sports betting or if states will force them to choose: get licensed as sportsbooks or get out of sports entirely. Kalshi has made it clear they're willing to fight in court, so don't be surprised if Tennessee becomes the next legal battleground.

The Legal Arguments

Prediction markets say: We're CFTC-regulated derivatives. Federal law preempts state gambling regulations. Our products are fundamentally different from sports betting because they're event outcome contracts, not wagers.

States say: If it looks like gambling, acts like gambling, and your users treat it like gambling, it's gambling. Get licensed or get out.

Courts so far: ¯_(ツ)_/¯

The political event ruling favored Kalshi, but sports events are a different beast. States have much clearer authority to regulate sports gambling under federal law, and prediction markets haven't won that specific fight yet.

The Bottom Line

Tennessee just declared that if you want to bet on sports in their state, you're going through licensed sportsbooks or you're not doing it at all. Kalshi and friends have a month to comply or fight. Given the money at stake and the precedent it would set, expect lawyers to get involved. This won't be the last prediction market battle—it's just the latest.