Prediction Market Underdog Files Suit in Five States
Jesse M. Cox Published 16/10/2026
Going on the offensive, prediction market site Underdog has filed lawsuits in seven states challenging crackdowns by state gaming commissions. The lawsuits were filed in Massachusetts, New Mexico, Ohio, Washington, Wisconsin, Connecticut, and Tennessee. Each filing aims to counter attempts by gaming authorities in those states to impose enforcement actions against prediction market sports-event contracts. Underdog is a Designated Contract Market registered with and federally regulated by the Commodity Futures Trading Commission (CFTC).
State gaming commissions are arguing in court filings that sports-event contracts regulated by the CFTC are nothing more than illegal sports betting and should not be permitted to be offered in states with legal and regulated sports betting unless they acquire the necessary license to operate.
Underdog sets new standard for prediction market lawsuits
Originally, Underdog filed suit in Massachusetts, New Mexico, Ohio, Washington, and Wisconsin on September 8. The Connecticut lawsuit followed a week later on September 15. Finally, there was a legal filing in Tennessee on October 13.
Filing five lawsuits at once and seven in total is unprecedented in the ongoing battle between prediction market sites and state gaming commissions. By taking this aggressive stand, Underdog is hoping to gain a foothold in these states. They are doing this before the gaming commission or attorney general's office files suits of their own. Those would be seeking to shut down Underdog's sports-event contracts.
Underdog's legal argument is standard fare for these prediction market battles with state regulators and lawmakers. In each case, lawyers representing the company are arguing that states do not have the legal standing to shut down a federally regulated exchange.
Tennessee lawsuit is the latest filing
This week saw Underdog adding Tennessee to its list of litigants. The company's latest lawsuit was brought before the US District Court for the Middle District of Tennessee. Attorney General Jonathan Skrmetti and officials from the Tennessee Sports Wagering Council (SWC) are listed as defendants.
The legal arguments put forth by both sides in court were demonstrative of the action taken in each of the previous lawsuits filed by Underdog.
According to reporting by rg.org, lawyers for Underdog are citing a proposal offered on October 9 by the CFTC. This proposal provides a definition of all event contracts, including sports-event contracts, as derivative swaps.
That same day, the SWC issued a cease-and-desist order to Underdog. It ordered a halt to the company's prediction market sports-event contracts.
Regulators argue that these contracts constitute wagers under Tennessee law. That would mean they require an SWC-issued sports betting license to operate in the Volunteer State.
The SWC is threatening to impose fines, civil penalties, and referral to law enforcement for further investigation. It also cautioned the company that Underdog’s license to operate a daily fantasy sports site in Tennessee may be revoked.
There's a dilemma facing Underdog in each of these lawsuits. The arguments their lawyers are putting forward have already been defeated on appeal in the Sixth Circuit Court in Tennessee and Ohio.
Underdog surrendered its daily fantasy sports license in seven states
These lawsuits come shortly after Underdog decided to halt offering its daily fantasy sports product, known as Drafts, in seven states. Halting all of Underdog's Drafts operations was undertaken in Massachusetts, Maryland, Michigan, Mississippi, New Jersey, Pennsylvania, and Ohio.
This decision was about placing the company's focus on its prediction market operation.
"Those states have taken a legal viewpoint we disagree with," Underdog CEO Jeremy Levine said in a statement on social media. "If we offer our CFTC-licensed products, we cannot offer fantasy sports in those states. So we had to choose. We could keep our fantasy licenses in those states, or surrender the licenses and offer effectively our full experience, minus Drafts."