The Tennessee Sports Wagering Council (SWC) has banned prediction market platforms Kalshi, Polymarket, and Crypto.com from offering sports betting contracts in the state. The SWC cited the platforms' operations as illegal gambling businesses without state licenses, despite their registration with the U.S. Commodity Futures Trading Commission (CFTC). The companies must cease activities by January 31 and refund deposits to residents, or face penalties up to $25,000 per violation. This move highlights the tension between state and federal regulations in the rapidly growing sports betting market. While prediction markets operate under CFTC oversight, they bypass state gambling laws, leading to regulatory arbitrage. Tennessee's action is part of a broader trend, with several states cracking down on such platforms to protect their tax revenues and regulatory authority.