US judge blocks Tennessee ban on Kalshi prediction markets
A US federal judge has temporarily blocked Tennessee gaming regulators from stopping prediction markets operator Kalshi from offering event-based contracts in the state, dealing a setback to state-level efforts to classify the platform’s products as illegal sports betting.
In a brief order issued on Monday, as reported by Reuters, US District Judge Aleta Trauger in Nashville granted a temporary restraining order preventing the Tennessee Sports Wagering Council and the state’s attorney general from enforcing Tennessee gaming and sports wagering laws against Kalshi. The judge said the company was likely to succeed on the merits of its claims and scheduled a 26 January hearing to determine whether a longer-lasting preliminary injunction should be issued.
The ruling followed a cease-and-desist letter sent to Kalshi on Friday by the Tennessee Sports Wagering Council, which regulates sports betting in the state. The letter accused the New York-based company of operating an “illegal gambling operation” and warned that it could face both civil and criminal penalties if it failed to halt its activities.
Kalshi offers users the ability to trade contracts tied to the outcomes of real-world events, including sports, entertainment, politics and economic indicators. The platform began offering sports-related event contracts nationwide in January 2025, drawing scrutiny from multiple state regulators who argue the products amount to unlicensed sports wagering. Tennessee regulators said Kalshi was violating state law by offering sports wagers without a licence and by enabling participation that could conflict with age restrictions, including rules prohibiting anyone under 21 from betting on match outcomes.
Kalshi disputes that characterisation. In its lawsuit, the company argued that Tennessee was unconstitutionally attempting to regulate a market that falls exclusively under federal jurisdiction, specifically that of the US Commodity Futures Trading Commission (CFTC). Kalshi is registered with the CFTC as a designated contract market, and it maintains that its event contracts are federally regulated financial instruments rather than gambling products.
Judge Trauger did not provide extensive reasoning in her initial order but indicated that Kalshi had met the legal threshold required for emergency relief.
A broader legal battle over prediction markets
The Tennessee case is part of a wider legal conflict between Kalshi and state regulators. The company has been involved in litigation with at least eight US states, many of which argue that allowing users to profit from predicting sports outcomes without a state-issued licence undermines established gambling frameworks.
Kalshi’s position suffered a significant setback in November, when a federal judge in Nevada ruled that the company was subject to Nevada’s gaming laws. Kalshi is appealing that decision, and the outcome is being closely watched by both regulators and the emerging prediction markets industry.
Judge Andrew Gordon issued a preliminary injunction to Kalshi at the beginning of 2025, preventing Nevada regulators from taking any action against the business. The court accepted, for the time being, that Kalshi’s CFTC registration shielded it from state oversight. This allowed Kalshi to continue operating while contesting Nevada’s position, but the ruling was later reversed.
NCAA-Kalshi clash
In related news, the National Collegiate Athletic Association lashed out at Kalshi, calling it “an unregulated marketplace” over its proposal of college sports event contracts. NCAA President Charlie Baker called the proposal “absolutely unacceptable” and warned that it would expose student-athletes to increased harassment and abuse.
Prediction market operator Kalshi withdrew plans following criticism. Responding to concerns about oversight, Kalshi previously told SiGMA News: “It’s inaccurate to say we are unregulated. We are a federally regulated exchange, governed by the Commodity Exchange Act and its hundreds of regulations. We as a company also have comprehensive internal policies to address trading integrity and responsibility issues, including in-house and third-party surveillance systems that monitor trading activity. We run Know-Your-Customer checks on everyone who trades on our platform.”
The transfer portal controversy follows earlier tensions between Kalshi and the NCAA. In November, the NCAA asked Kalshi to stop implying any relationship between the two organisations.
Insider trading controversy and Mansour’s response
The legal dispute unfolds against a broader political and reputational debate over insider trading in prediction markets. Kalshi CEO Tarek Mansour has recently used controversy surrounding offshore platforms to draw a sharp distinction between Kalshi’s regulated model and what he describes as lightly policed, non-American alternatives.
In a recent LinkedIn post, Mansour said that “recent reporting has been conflating regulated prediction markets with unregulated, offshore prediction markets,” adding that the practices of non-US platforms “have no relationship to what regulated, American platforms do.”
His comments follow intense scrutiny of offshore platform Polymarket, where one account reportedly earned more than $400,000 from a trade linked to the reported capture of Venezuelan leader Nicolás Maduro. The episode fuelled allegations that prediction markets can reward insiders with access to sensitive, non-public information.
Mansour has also publicly backed Representative Ritchie Torres’ forthcoming Public Integrity in Financial Prediction Markets Act of 2026, which would bar federal officials and senior government figures from trading on prediction markets using non-public information. He says the proposal aligns with Kalshi’s existing rules, which treat insider trading as a serious financial crime, similar to offences in traditional securities markets.
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