In what has become a predictable pattern, Kalshi is suing the Tennessee Sports Wagering Council (TSWC) after the regulator issued a cease-and-desist order to the prediction market operator.
Key Takeaways
- The TSWC issued a cease-and-desist order to Kalshi on Friday.
- Kalshi has received numerous cease-and-desist orders from state regulators who allege Kalshi is in breach of state gambling laws.
- Kalshi is now actively battling a half dozen states in federal court.
The TSWC issued cease-and-desist orders to Kalshi, Polymarket, and Crypto.com on Friday, alleging the prediction markets were operating in violation of state laws. Kalshi fired back with a lawsuit the very same day.
Gaming attorney Daniel Wallach was first to break the news on Kalshi’s latest suit.
NEW: Kalshi has sued the Tennessee Sports Wagering Council in federal court (Middle District of Tennessee) in response to the agency's cease-and-desist letter over sports event contracts and also filed a motion for preliminary injunction with an emergency hearing requested. pic.twitter.com/zYogRPePah
— Daniel Wallach (@WALLACHLEGAL) January 12, 2026
Kalshi’s lawsuit was issued in the United States District Court for the Middle District of Tennessee. The lawsuit “challenges the State of Tennessee’s intrusion into the federal government’s exclusive authority to regulate derivates trading on exchanges overseen by the Commodity Futures Trading Commission.” Kalshi is seeking a motion for preliminary injunction and has requested an emergency hearing.
The company's request for a temporary restraining order was granted by the Tennessee District Court.
TN District Court grants Kalshi's motion for temporary restraining against state regulators. Hearing on preliminary injunction scheduled for Jan 26 pic.twitter.com/BsL4nOOw0P
— Mick Bransfield (@MickBransfield) January 12, 2026
Apparently Kalshi tried to persuade Tennessee from issuing a cease-and-desist order. In the weeks prior to the order, a representative for Kalshi contacted Lacey Mase, Chief Deputy Attorney General (AG) of Tennessee. In a series of emails, the representative asked if the AG’s office would be open to a call with Kalshi’s national council, stating, “Kalshi has had productive discussions with authorities in a number of other states, several of which have opted to take a wait-and-see approach the current litigation plays out.”
Their representative was none other than Robert E. Cooper Jr., former Attorney General of the State of Tennessee. But Tennessee wasn’t having it. In a Sunday email, the AG’s office wrote to Kalshi, “We will not be staying enforcement pursuant to your request.”
Tennessee now becomes the sixth state Kalshi has sued in federal court, including Nevada, New Jersey, Maryland, New York, and Connecticut. And if more states issue Kalshi cease-and-desist orders, that tally is sure to grow.
Kalshi’s battles with state regulators began in earnest once it started offering sporting event contracts nearly one year ago. As a prediction market, Kalshi is federally regulated by the Commodity Futures Trading Commission. When it started offering sporting event contracts – including prop bets and parlays – states had a problem with it. After all, Kalshi wasn’t licensed by the states nor was it paying state sports betting taxes like other legal and licensed sportsbooks.
It's safe to say that no single lawsuit will bring the matter between Kalshi and state regulators to a close. The issue between state and federal regulation of sports-related prediction markets is likely one that will need the decision of a higher court.
