A U.S. District Judge in Tennessee has issued a preliminary injunction preventing state officials from enforcing local betting laws against Kalshi, a prediction market platform. Judge Aleta A. Trauger ruled that Kalshi's sports event contracts qualify as swaps under the Commodity Exchange Act, thus exempting them from state-level regulation under the Tennessee Sports Betting Act. This decision follows a cease and desist letter from Tennessee regulators, who claimed Kalshi was operating without a state license. The ruling highlights a conflict between state licensing requirements and federal CFTC rules, suggesting that state regulation could disrupt federal oversight of derivatives markets. The case may eventually reach the Supreme Court due to differing rulings in other states, with New Jersey granting similar injunctions while Maryland and Nevada have denied them. Kalshi remains the largest prediction market exchange by trading volume, handling over $9.5 billion in January.