Judge blocks Tennessee order targeting Kalshi sports-event contracts

A federal judge on Jan. 13 temporarily barred Tennessee officials from enforcing state sports wagering and illegal-gambling statutes against Kalshi Markets, preserving the prediction‑markets operator’s ability to offer sports‑event contracts to residents while the legal fight unfolds. U.S. District Judge Aleta A. Trauger granted the temporary restraining order after Kalshi sued the Tennessee Sports Wagering Council and the state attorney general, saying the contracts fall under exclusive federal oversight by the Commodity Futures Trading Commission.

Kalshi filed its complaint on Jan. 9 and moved quickly for emergency relief after the regulator ordered the company, along with Polymarket and Crypto.com, to stop offering sports‑event contracts to Tennessee residents, void open contracts, refund customer deposits, and cease in‑state activity by Jan. 31. The council warned that noncompliance could carry civil penalties up to $25,000 per violation and potential criminal referrals for aggravated gambling promotion. The TRO applies to Kalshi only and restrains Tennessee from enforcing Tenn. Code Ann. §§ 4‑49‑101 et seq. and Tenn. Code Ann. §§ 39‑17‑501 et seq. against Kalshi’s offerings while the case proceeds.

In granting temporary relief, the court found Kalshi was likely to succeed on the merits and that enforcement would cause irreparable harm, legal standards that justified blocking state enforcement pending a preliminary injunction hearing set for Jan. 26. The decision mirrors a 2025 federal finding in New Jersey in which a judge concluded similar Kalshi contracts fell within the CFTC’s exclusive jurisdiction and were therefore preempted from state regulation. Federal courts remain split on that question, and the Tennessee ruling places the state in the same posture as New Jersey pending further briefing and argument.

At stake is more than a single company’s product line. The case is shaping how the law treats new financialized forms of sports speculation that sit between traditional gambling and regulated derivatives. Kalshi asserts that as a CFTC‑regulated designated contract market its sports‑event contracts are commodity derivatives, subject to federal rules designed to police fraud, market manipulation, and systemic risk. States counter that their gambling statutes are aimed at protecting consumers and preserving public order, and they have relied on longstanding criminal and civil tools to govern wagering on athletics.

The broader industry watched the Tennessee order closely because the outcome could set a template for operators and regulators nationwide. If federal preemption prevails, firms will have clearer avenues to develop prediction markets under a single federal regime, potentially encouraging greater investment, the entry of institutional players, and new product development. Conversely, sustained state authority would preserve a patchwork of local restrictions and enforcement priorities, complicating business plans and consumer access.

Cultural and social implications run in parallel. Prediction markets blur the line between fandom and finance, offering fans new ways to monetize knowledge and attention while raising familiar concerns about gambling addiction, underage participation, and the commercialization of sports engagement. Regulators and courts will need to balance innovation and market integrity against those social harms.

The Jan. 26 preliminary injunction hearing will be pivotal. A longer injunction could cement federal oversight in Tennessee and influence pending or potential actions by other states. If courts remain divided, the dispute could ultimately reach higher appellate courts, where decisions will determine whether prediction markets evolve under a unified federal framework or remain subject to a state-by-state regulatory patchwork.