Ann. §§ 4-49-117(b)(11)(A)(i)–(ii), (e), -104(b). 8 Bettors must be at least 21 years old and “physically located in” Tennessee. Id. § 4-49-111. The Act enumerates fourteen categories of people who cannot place bets and prohibits certain kinds of bets on college sports. Id. §§ 4-29- 112(a), -114(a)(1)(B). To ensure “[r]esponsible sports wagering,” the Act requires that licensees “allow bettors to restrict themselves from placing wagers with the licensee” and to limit the amount they bet or the time they spend betting. Id. § 4-49-119(a.) The Act provides for the use of the privilege tax: 80% toward public school buildings, 15% to local governments for “emergency services or local infrastructure projects,” and 5% for mental health treatment to address problem gambling and juvenile addiction and mental health disorders. Id. §§ 4-49-104(e)(1)(A), (2), (3), - 119(c)(1)(A). The Act imposes administrative fines 9 and civil penalties 10 for violations. Id. §§ 4- 49-126(c), -127(b), -129(a). And it is a misdemeanor to accept bets from anyone under 21 years of age. Id. § 4-49-118(a)(1), (b), -102(19) (defining “minor”). B. Kalshi’s and its sports event contracts “Kalshi operates a derivatives exchange and prediction market where users can buy and sell financial products known as event contracts.” (Doc. No. 1 ¶ 19.) In 2020, the CFTC designated Kalshi as a contract market. ( Id. ¶ 46.) Kalshi has since offered event contracts “related to an array of substantive areas like climate, technology, health, crypto, popular culture, and economics.” ( Id. ¶ 48.) Since January 2025, it has also offered sports event contracts. ( Id. ¶ 49.) On January 22, 8 The initial licensing fee is $750,000, and the annual fee is either $750,000 or $350,000, depending on betting volume. Tenn. Comp. R. & Regs. 1350-01-.04(1)(b). The privilege tax is 1.85% of the licensee’s gross wagers. Tenn. Code Ann. §§ 49-49-104(b), -102(12). 9 The Act provides for fines of up to $25,000 per offense for accepting wagers without a license. Tenn. Code Ann. § 4-49-127(b)(2)(C); see also Tenn. Comp. R. & Regs. 1350-02-.11(2) (describing the range of fines “depending on the seriousness of the violation”). 10 The Act provides for civil penalties of $5,000 per violation and authorizes the attorney general to seek an injunction to enforce the penalty. Tenn. Code Ann. § 4-49-129(a), (b).
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Case 3:26-cv-00034 Document 48 Filed 02/19/26 Page 9 of 25 PageID #: 877
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