Tennessee's sports wagering regulator just dropped a bombshell: Kalshi and Polymarket have been ordered to immediately halt offering sports prediction contracts to state residents. Existing contracts? They're being voided, and users get refunds by January 31, 2026.

The reasoning is straightforward—unlicensed wagering operations under Tennessee state law. But here's where it gets interesting: both platforms are firing back, arguing that CFTC (Commodity Futures Trading Commission) preemption shields them from state-level restrictions.

This clash between federal and state authority is pivotal for the crypto derivatives space. If states win this jurisdictional battle, expect a patchwork of regional restrictions. If CFTC preemption holds, it could reshape how prediction markets operate across the U.S. Either way, users in regulated jurisdictions need to stay sharp on compliance shifts—the regulatory landscape for on-chain derivatives is moving faster than blockchain confirmations.