Sports Wagering Council issued cease-and-desist letters ordering Kalshi, Polymarket and Crypto.com to stop offering sports event contracts to state residents.
The regulator said the platforms are illegally offering sports wagering without a licence under the Tennessee Sports Gaming Act.
The council argued that labelling the products as event contracts does not exempt them from state gambling laws.
Regulators said the platforms lack consumer protections required of licensed sportsbooks, including age limits, responsible gaming tools and anti-money laundering controls.
The companies were ordered to void all existing sports contracts in Tennessee and refund user funds by 31 January 2026.
The council warned that failure to comply could result in fines of up to $25,000 per offence and possible court injunctions.
Officials also cautioned that continued noncompliance could lead to referrals to law enforcement for further investigation.
The regulator said federal commodities oversight does not override Tennessee’s authority to regulate sports betting within the state.
The action follows similar enforcement efforts by other US states challenging prediction markets tied to sports outcomes.