A federal judge issued a temporary restraining order that paused Tennessee’s effort to force Kalshi to stop offering sports-event contracts and return user funds. The decision immediately reduced near-term shutdown risk for Kalshi’s Tennessee operations while the case proceeds.
The order reflected the court’s view that enforcement could cause immediate harm and that Kalshi has a credible legal path on federal oversight. Judge Aleta Trauger wrote that Kalshi would face “irreparable injury and loss” if Tennessee’s directive were enforced.
BREAKING: Tennessee Sports Wagering Council sends cease-and-desist letters to Kalshi (📸), Polymarket and Crypto, demanding that they cease offering sports event contracts to TN customers immediately, void all pending contracts and issue refunds by Jan. 31. Lawsuits are imminent. pic.twitter.com/jDIPIwsrCn
— Daniel Wallach (@WALLACHLEGAL) January 9, 2026
What the court paused and what happens next
The Tennessee Sports Wagering Council issued its cease-and-desist directive on January 9, 2026, demanding Kalshi halt sports-related contracts and refund customer funds by January 31. The temporary restraining order blocks Tennessee from enforcing that directive while the court considers longer-lasting relief.
Key dates now frame the operating window: January 9 (cease-and-desist), January 12 (temporary restraining order granted), January 26 (preliminary injunction hearing), and January 31 (the regulator’s refund deadline). This schedule effectively shifts the near-term decision point to the January 26 hearing.
Kalshi’s core argument is federal preemption—its position is that these event contracts fall under Commodity Futures Trading Commission regulation rather than state gambling law. The dispute is fundamentally about whether federal commodities oversight displaces state-level sports wagering enforcement for these products.
Prior court outcomes underscore why operators are treating this as a live jurisdictional contest: courts in New Jersey and Nevada have granted Kalshi preliminary injunctions blocking state enforcement, while a Maryland court denied similar relief and allowed regulators to proceed. That mixed track record keeps the compliance posture fragmented across states.
Practical implications for markets and risk teams
For traders, liquidity providers, and treasury teams, the immediate takeaway is that platform access and counterparty risk can change quickly when state regulators pursue shutdowns or forced refunds. Position sizing, liquidity assumptions, and funding plans should reflect the possibility of abrupt jurisdictional constraints.
Attention now turns to January 26, when the court will weigh a preliminary injunction that could extend protection beyond the short-term restraining order. That hearing will be the key test of whether the CFTC-preemption theory holds enough weight to deter similar state actions in other jurisdictions already in dispute.