In a blender, add cubed watermelon and sparkling water. Blend until smooth. Strain juice using sieve to remove the pulp from the watermelon.
Transfer watermelon juice to a drink dispenser or punch bowl. Stir in lime juice, tequila, sugar and jalapeño slices. Chill until ready to serve.
In a small plate, add desired Tajin (or chili powder) and sea salt. Run a lime wedge around the rim of each glass. Place each glass upside down on the chili salt, coating the rim. Pour tequila watermelon punch into each glass, add ice and enjoy!