Blend the sugar and lime juice in a blender until the sugar dissolves.
Add the watermelon, tequila, and cayenne. Puree until smooth.
Pour the mixture into 10 3-ounce or 8 4-ounce ice pop molds, dividing evenly. Insert ice-pop sticks and freeze until firm, at least 8 hours or overnight.
I would use cinnamon rather than cayenne.