Underdog sued Massachusetts, New Mexico, Ohio, Wisconsin, and Washington on September 8, seeking permanent injunctions against enforcement of state gaming laws affecting its prediction-market business. The complaints seek declarations that applying state gambling laws to Underdog’s prediction markets would violate the US Constitution’s Supremacy Clause, placing the company in the wider dispute over federal and state authority over sports event contracts.
Underdog argues that its event contracts fall under the exclusive jurisdiction of the Commodity Futures Trading Commission, meaning states cannot regulate them as sports betting. The company is seeking federal court intervention before the defendant states take action against it, contending that their actions involving other prediction-market operators create a threat of similar enforcement.
A Legal Patchwork Awaiting Supreme Court Review
Courts have reached differing conclusions on whether sports event contracts fall exclusively under federal commodities law or remain subject to state gambling regulation. New Jersey has petitioned the US Supreme Court to consider whether federal commodities law prevents states from regulating sports event contracts offered through CFTC-regulated exchanges.
Stacie Stern, Underdog’s senior vice president of government affairs and partnerships, told SBC Americas that the company respects state regulators but views litigation as necessary to resolve the dispute. She said divergent rulings across the country have created uncertainty and that the Supreme Court should decide whether the industry will operate under one federal standard or state-by-state regulation.
DFS Retreat Paves the Way for Prediction Markets
The lawsuits were filed just days after Underdog abandoned its daily fantasy sports licenses in Maryland, Massachusetts, Michigan, Mississippi, New Jersey, Ohio, and Pennsylvania. The company’s withdrawal from those states preceded its legal action against five of them and highlighted its focus on prediction markets.
The timing also coincides with the start of the NFL season, described as the most lucrative period of the US sports-betting calendar. The American Gaming Association has warned that prediction markets are increasingly taking business from state-regulated sports betting. The trade group estimates that Americans will legally wager $29.5 billion with regulated sportsbooks during the 2026 NFL season, a figure it describes as virtually unchanged from the prior year.
Each of the five states named in Underdog’s lawsuits is involved in litigation or enforcement action concerning other prediction-market operators. In each filing, Underdog seeks a permanent injunction preventing enforcement of state gambling laws against its products, along with a declaratory judgment that such enforcement would be unlawful.
Underdog began offering prediction markets through a partnership with Crypto.com and later acquired Aristotle Exchange, a CFTC-registered designated contract market. The company also entered into an agreement to be acquired by IG Group. Its lawsuits ask federal courts to determine whether state gaming laws can be enforced against its prediction-market offerings.
Source: Casino.org
Petra Vanhoof has spent the better part of a decade following the shifting tides of gambling regulation across Europe and beyond. She came up through the compliance side of the industry before pivoting to writing, which gives her a grounded, no-nonsense perspective on the rules, loopholes, and political maneuvering that shape how operators actually do business. She is particularly drawn to the gap between what regulators say and what the market ends up doing in response.