Underdog Files Federal Lawsuits in Five States to Block Gambling Law Enforcement on CFTC-Approved Event Contracts

Underdog has filed federal lawsuits in Ohio, Massachusetts, Wisconsin, New Mexico and Washington seeking to prevent those states from enforcing gambling laws against its sports event contracts. The complaints, filed in US district court in each state, request permanent injunctions barring enforcement of state wagering statutes against the company’s prediction market services. They also seek declaratory judgments that the provisions violate the Supremacy Clause because the products are regulated by the Commodity Futures Trading Commission.

The operator selected these states because they have already taken legal action against other prediction market operators. The Massachusetts complaint references an enforcement action by that state’s attorney general against Kalshi, which resulted in a preliminary injunction on sports-related event contracts that was later stayed pending appeal. Underdog states that any similar enforcement against its CFTC-designated contract market would lack merit, as the CFTC has taken the position that such state actions violate the Supremacy Clause.

Federal Licensing Versus State Enforcement

Stacie Stern, Underdog senior vice president of government affairs and partnerships, said: “We’re licensed by the federal government to offer markets, and we take our responsibilities as a federal exchange seriously and strictly comply with all regulations. Do we believe we are right on the law? Yes. Do we accept that these state gaming boards believe they are right on the law? Yes. We’ve worked with them, we respect them, and we didn’t want to sue, but sometimes it’s the only way to resolve a dispute. With cases and divergent rulings across the country, everyone can see what’s happening in our industry: it’s a mess. We need the Supreme Court to decide whether we’ll have one enforceable federal standard or state-by-state regulation.”

Underdog has completed CFTC approval procedures to offer and facilitate event contracts. As reported by Focus Gaming News, the company maintains that the CFTC holds exclusive jurisdiction over trading on designated contract markets.

Operational Shift Following License Surrenders

The suits follow Underdog’s surrender of daily fantasy sports licenses in Massachusetts, Maryland, Michigan, Mississippi, New Jersey, Pennsylvania and Ohio. Jeremy Levine, Underdog chief executive and founder, said new Drafts entries in those states would stop after NFL kick-off today. Contests already entered will continue as normal.

Levine said the seven states had told Underdog it could not offer both daily fantasy sports and CFTC-licensed products. The litigation seeks to resolve the resulting regulatory conflict through federal court rulings that could reach the Supreme Court.

Reporting: Focus Gaming News

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