A federal judge put a temporary block on Tennessee regulators enforcing gambling laws on Kalshi and delivered a procedural win at the start of the jurisdiction dispute under federal regulation.

A US order dated 12 January from Judge Aleta Trauger stops the Tennessee Sports Wagering Council and state officials from using state gambling statutes against Kalshi during review. The court stated that Kalshi shows strength on its claims and enforcement under Tennessee law may cross federal limits by blocking rights under federal reach. Judge Trauger stated Kalshi may take harm without the block and said the balance of equities requires a pause. A preliminary injunction hearing takes place on 26 January and Kalshi must post a $500 security bond for the order to continue.

The ruling does not settle the case and keeps the state and Kalshi in place until a decision is made on state power over federally approved event contracts. The core of the case involves Kalshi operating as a derivatives exchange under the Commodity Futures Trading Commission and state claims that sports event contracts count as gambling. State leaders said the contracts enter the state’s ban on sports wagering when sold to people inside Tennessee. Kalshi said its instruments fall under federal law and cannot be subject to action by Tennessee gambling rules.

Tennessee Moves to Block Prediction Markets

This matter follows moves last week from Tennessee against several prediction market firms. The Tennessee Sports Wagering Council told Kalshi, Polymarket, and Crypto.com to stop offering sports event contracts to state users and cited gambling without licenses. Regulators also ordered firms to switch off Tennessee access, return deposits, and close open positions by 31 January. Officials also noted the failure to comply may bring civil fines up to $25,000 per breach and possible criminal referral for illegal gambling promotion.

These steps form part of the conflict between state gambling controls and federal markets that deal in event contracts. Kalshi and similar platforms run under CFTC oversight and state bodies said sports event contracts copy sports betting outcomes. The main question asks if federal commodities law stands above state gambling law when event outcomes sit inside the contract. Polymarket and Crypto.com have not said publicly if they plan legal action in the state. Kalshi’s outcome may guide responses by other states facing the same markets.