Quick Breakdown
- A federal judge temporarily blocks Tennessee from enforcing actions against Kalshi, allowing it to keep operating while its legal challenge moves forward.
- Kalshi argues it’s federally regulated under the CFTC, challenging state authority over prediction markets and recent cease-and-desist orders.
- Enforcement in Tennessee is paused until a January 26 preliminary injunction hearing, reflecting a broader legal battle between states and prediction market platforms.
A federal judge has temporarily blocked Tennessee regulators from taking enforcement action against prediction market platform Kalshi, allowing the company to continue operating in the state while its legal challenge proceeds.
On Monday, U.S. District Judge Aleta Trauger approved Kalshi’s request for temporary relief, preventing the Tennessee Sports Wagering Council and the state’s attorney general from enforcing a recent cease-and-desist order.
The court found that Kalshi could face serious and irreversible harm if the state’s actions were allowed to move forward and noted that the company’s legal arguments are likely to succeed.
BREAKING: Tennessee Sports Wagering Council sends cease-and-desist letters to Kalshi (📸), Polymarket and Crypto, demanding that they cease offering sports event contracts to TN customers immediately, void all pending contracts and issue refunds by Jan. 31. Lawsuits are imminent. pic.twitter.com/jDIPIwsrCn
— Daniel Wallach (@WALLACHLEGAL) January 9, 2026
Kalshi challenges state authority over prediction markets
The ruling follows enforcement notices sent on January 9, 2026 to Kalshi, Polymarket, and Crypto.com, in which Tennessee regulators accused the platforms of offering sports-related contracts without proper state licensing. The notices ordered the companies to halt operations in Tennessee, void existing contracts, and refund users in the state by January 31, with potential penalties of up to $25,000 per violation.
Kalshi responded by filing a lawsuit against state officials, arguing that Tennessee overstepped its authority. The company maintains that it operates as a federally regulated derivatives exchange and falls under the exclusive oversight of the Commodity Futures Trading Commission. According to Kalshi, state attempts to regulate its products interfere with the federal framework governing derivatives markets.
The dispute in Tennessee reflects a broader legal battle between prediction market platforms and state regulators. Courts in Nevada and New Jersey have previously granted Kalshi temporary relief from state enforcement actions, while a federal judge in Maryland declined to do so in a similar case.
Enforcement efforts in Tennessee will remain on hold until a preliminary injunction hearing scheduled for January 26. Until then, Kalshi is permitted to continue offering its services within the state.
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