1. Grate zest from 1 lime to equal 1 tsp. Squeeze juice from limes to equal 1/2 cup. Process lime juice and watermelon in a blender until smooth. Pour through a fine wire-mesh strainer into a large measuring cup, discarding solids. Stir in tequila, sugar, and 1 tsp. lime zest, stirring until sugar dissolves. Pour mixture into paper cups.
2. Cover each cup with aluminum foil; make a small slit in center, and insert 1 ice-cream spoon into each cup. Freeze 8 hours or until firm.