Underdog Sues Five States Over Sports Event Contracts

Underdog sued five states on Sept. 8, asking federal judges to bar them from enforcing gambling laws against its sports event contracts.

The complaints landed in Ohio, Massachusetts, Wisconsin, New Mexico and Washington. They came three days after the operator surrendered daily fantasy sports licenses in seven states rather than shut its federally licensed prediction markets. Those markets have traded almost $6.5 billion in notional volume since September 2025.

Underdog Asks Judges to Bar State Enforcement

Each suit seeks a permanent injunction against state gambling enforcement and a declaratory judgment that the challenged state provisions are unconstitutional. Underdog invokes the Supremacy Clause, the constitutional rule that federal law overrides conflicting state law.

The company argues the Commodity Futures Trading Commission (CFTC) holds exclusive jurisdiction over designated contract markets, the federal exchange category its own venue occupies. Underdog launched that exchange on July 18 and holds exchange, clearing and brokerage registrations. IG Group agreed to buy the company for up to $1.3 billion in July.

We need the Supreme Court to decide whether we'll have one, enforceable federal standard or state-by-state regulation.

Stacie Stern, Underdog's senior vice president of government affairs and partnerships, told Sports Betting Dime the company "didn't want to sue, but sometimes it's the only way to resolve a dispute."

Fantasy Exit Leaves the Fight to Divided Courts

The fantasy retreat came first. Chief Executive Jeremy Levine wrote on X on Sept. 5 that seven states had told Underdog it could not keep state fantasy licenses while offering CFTC-licensed products. Its Drafts contests closed in Maryland, Massachusetts, Michigan, Mississippi, New Jersey, Ohio and Pennsylvania after the NFL season opener.

A federal appeals court let Nevada enforce its gambling law against Kalshi in August, after another appeals court ruled the other way in April. Massachusetts holds a state-court injunction against Kalshi that is stayed pending appeal.

Rival exchange Novig sued New York on the same preemption theory in August. None of the five courts has set a hearing date, leaving Underdog's contracts licensed under federal law and contested under five state gambling codes.

Treat gambling as entertainment you pay for. 18+, and if it stops feeling like entertainment, help exists at BeGambleAware and GamCare.