Tennessee Regulators Challenge Legality of Online Prediction Markets
In a significant move, Tennessee state regulators have issued cease-and-desist orders to three prominent online prediction market platforms—Kalshi, Polymarket, and Crypto.com. These platforms have been accused of violating Tennessee’s gambling laws by allowing contracts to be purchased based on sports event outcomes.
Key Compliance Deadlines and Potential Penalties
The Tennessee Sports Wagering Council announced that these platforms must halt their operations in the state, void all existing contracts with Tennessee residents, and refund user deposits by January 31, 2025. Non-compliance with these directives could lead to severe penalties, including $25,000 civil fines per violation and potential felony charges for aggravated gambling promotion under Tennessee law.
State Versus Federal Regulatory Disputes
This crackdown sparks debate over the regulatory authority of state versus federal entities. While the platforms operate as federally regulated designated contract markets under the Commodity Futures Trading Commission (CFTC), Tennessee law mandates state licensing for entities offering sports-related wagers. The Sports Gaming Act specifically prohibits unlicensed sports betting, and state officials argue that these contracts constitute illegal wagering rather than legitimate derivatives trading. Despite this, the platforms argue that they operate legally under federal derivatives regulations.
Broader Implications and Similar Actions
This enforcement action in Tennessee reflects a larger trend, as other states like Connecticut have also issued similar orders to online platforms, including Robinhood, Kalshi, and Crypto.com. These actions highlight growing tension between state and federal regulatory frameworks in the world of online betting and financial contracts.
Key Takeaway
The deadline for compliance with the cease-and-desist orders looms large for the accused platforms. By enforcing these laws, Tennessee aims to maintain control over gambling activities within its jurisdiction and send a clear message to unlicensed operators.
Stay Secure with Regulated Financial Solutions
For those interested in trading and financial predictions in a safe and regulated environment, consider platforms that comply fully with both state and federal guidelines. For example, XYZ Regulated Financial Platform ensures secure and compliant trading experiences for all users.
