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- Underdog filed a federal lawsuit against Tennessee officials seeking an injunction against a cease-and-desist letter targeting its sports event contracts.
- The state claims the contracts are unlicensed sports wagers, while Underdog argues they are federally regulated swaps governed by the CFTC.
Underdog has sued Tennessee officials after the state ordered the company to stop offering sports event contracts, escalating a broader fight over whether those products fall under state gambling law or exclusive federal regulation.
The case, filed in the U.S. District Court for the Middle District of Tennessee, challenges a cease-and-desist letter sent by the Tennessee Sports Wagering Council four days earlier. According to the complaint, Tennessee demanded that Underdog immediately halt the contracts and threatened penalties, a referral to law enforcement, and possible action against a separate affiliate’s fantasy sports license.
For bettors and operators, the dispute matters because it adds another state-level test of how sports prediction contracts will be treated in the U.S. Underdog argues its products are federally regulated event contracts. Tennessee says they are sports wagers that require a state sports betting license.
What Tennessee and Underdog are fighting over
Underdog’s lawsuit names Attorney General Jonathan Skrmetti and Sports Wagering Council officials as defendants. The company is seeking a declaration that federal commodities law prevents Tennessee from applying its gambling laws to Underdog’s event-contract business, along with a permanent injunction.
According to the fact pattern in the case, Underdog began offering event contracts in Tennessee on Aug. 28. The company says those contracts fall under the Commodity Futures Trading Commission’s exclusive jurisdiction.
Tennessee’s position is that the products are effectively sports wagers, which would make them subject to the state’s sports betting rules and licensing requirements.
The Tennessee action also reaches beyond the contracts themselves. The complaint says regulators threatened possible consequences for Underdog Sports, a separate affiliate that holds a Tennessee fantasy sports license.
The case lands in a fast-changing prediction market landscape
The Tennessee suit is one of seven jurisdictions in Underdog’s state-by-state litigation campaign. The company has also sued officials in Connecticut, Massachusetts, New Mexico, Ohio, Washington, and Wisconsin.
The legal backdrop has been shifting quickly. The Sixth Circuit recently vacated a preliminary injunction that had protected Kalshi from Tennessee enforcement and also affirmed an Ohio court’s refusal to grant similar protection. The appeals court said the sports event contracts at issue likely did not qualify as swaps under federal commodities law. It also said that even if they were swaps, federal law would not stop Tennessee and Ohio from enforcing their gambling laws.
At the same time, the broader federal picture is still unsettled. Last week, the CFTC proposed clarifying that sports-related event contracts fall within the federal definition of swaps. The agency also issued an interim final rule excluding qualifying casino-style gambling products from that definition.
What comes next
The immediate question in Tennessee is whether the district court will grant Underdog’s request for injunctive relief before the state takes further enforcement action.
More broadly, the case adds to a split legal landscape around prediction markets. The Third Circuit has sided with Kalshi in New Jersey, while the Ninth Circuit has ruled against Kalshi in litigation involving Nevada regulators and California tribes. The New Jersey case is now before the Supreme Court on a pending petition.
Source: As reported by news.google.com.
