Underdog Sports has filed five federal lawsuits against Massachusetts, New Mexico, Ohio, Wisconsin and Washington, asking judges to block state regulators and attorneys general from moving against its sports prediction market business. The company wants permanent injunctions and declarations that state gambling laws cannot be used to shut the product.
As reported on Sept. 5, Underdog had already said it would surrender its daily fantasy sports licenses in seven states, including Massachusetts, Maryland, Michigan, Mississippi, New Jersey, Pennsylvania and Ohio. Existing Drafts entries can run to completion, but no new contests are being accepted in those markets.
The new cases argue that the contracts fall under the Commodity Futures Trading Commission’s exclusive jurisdiction, so state law cannot reach them. Underdog also says applying state gambling statutes to the business would breach the U.S. Constitution’s Supremacy Clause, and it says it has complied with CFTC approval procedures for the event contracts it offers in those states.
Stacie Stern, speaking for the company, said Underdog is licensed by the federal government to offer markets and that it takes those responsibilities seriously. She said the company believes it is right on the law, respects state regulators and did not want to sue, but sometimes litigation is the only way to resolve a dispute. She also said the industry needs a single enforceable national standard rather than a patchwork of state-by-state rulings.
The five states Underdog chose are already part of other prediction-market disputes, including litigation involving Kalshi and, in some cases, the CFTC. In March, the CFTC said prediction markets offering swaps or futures to the public must register as designated contract markets, and the agency said it has seen a significant increase in event contracts since 2021.
