Underdog sues Connecticut, Montana pauses Kalshi enforcement, Genius Sports enters the fray
Underdog has filed a federal lawsuit against Connecticut officials after being one of nine companies to receive a cease-and-desist order, stating their sports-event contracts violate state gaming and unfair-trade-practices laws.
The Connecticut Department of Consumer Protection (DCP) ordered Underdog, Polymarket, Coinbase, Crypto.com, Robinhood, Prophet X, Novig, Webull, and Gemini to halt sports-related contracts. The platforms must stop advertising sports-event contracts and allow Connecticut users to withdraw existing funds.
In Underdog’s complaint, the company asked the U.S. District Court for the District of Connecticut to prohibit the DCP and Attorney General William Tong from “unlawfully” exercising state jurisdiction over the company’s event contracts.
The 39-page complaint asked for a declaratory judgment that Connecticut can’t apply state gaming regulations to event contracts, as well as a permanent injunction blocking state authorities from enforcing their gaming laws in relation to Underdog’s prediction markets.
Underdog also wants the court to block any efforts by Connecticut to regulate prediction markets. In their complaint, Underdog reminds the federal court that they operate federally regulated designated contract markets that list live events contracts for trading.
Underdog argued that the Commodity Futures Trading Commission (CFTC) has sole regulatory authority over event contracts and other derivatives traded on DCMs, including a decision whether to prohibit certain event contracts related to gaming as contrary to the public interest.
Connecticut officials believe these markets bypass rules by allowing bets from individuals under 21, people on self-exclusion lists, and bets on in-state college teams, all of which violate state gaming regulations.
The CFTC and companies like Robinhood have also filed actions in federal court to block Connecticut’s enforcement, arguing that federal oversight preempts state gambling rules.
Montana pauses Kalshi enforcement
Kalshi has dropped its Montana lawsuit, while the state has agreed not to enforce its gambling laws against the company as it seeks a rehearing of its case by the U.S. Court of Appeals for the Ninth Circuit.
Under a five-page joint stipulation, Montana agreed not to pursue enforcement, investigation, cease-and-desist proceedings, or other administrative action against Kalshi until the denial of further review or an en banc decision by the Ninth Circuit. Montana is also required to give Kalshi 30-days written notice if it seeks to commence action once a decision is announced. The agreement is a result of Kalshi’s September 9 petition seeking a rehearing of the Ninth Circuit’s ruling last month in the consolidated Nevada case.
Last month, the federal appeals court allowed Nevada to ban Kalshi and other prediction markets. In a unanimous opinion, the Ninth Circuit disagreed “with Kalshi’s overly broad reading” that the Commodity Exchange Act allows it to offer sports-event contracts.
Genius Sports launches new site, CEO talks prediction markets
Genius Sports launched Prediction.com, a consumer-facing website designed to compare probabilities, pricing, and event contracts across multiple platforms and follow how market probabilities change as events unfold. The site combines Genius’s live sports data with the consumer technology acquired through its $1.2 billion acquisition of Legend earlier this year. The new site is part comparison services, part market-data platform, and part educational site.
“Prediction.com brings it together, combining Legend’s consumer technology with Genius Sports’s live data to make prediction markets easier to understand, compare, and follow,” the company said.
Meanwhile, Genius Sports CEO Mark Locke said as a business-to-business data provider to traditional sportsbooks, the company is in a unique position to benefit from the expansion of event contracts, especially sports-related contracts.
Genius already has deals with both Polymarket and Kalshi. Locke believes the demand created by the rise of prediction markets is here to stay, but not necessarily in its current structure.
“Demand can endure while access narrows, activity falls, or customers move between products,” Locke wrote in a letter to investors. “The distinction is between confidence in the underlying appetite for sports wagering and confidence in any particular platform’s current business model.”
Locke made it clear that Genius does not need to make the second bet to benefit from the first, saying if “prediction-market customers do not stick, the activity returns to the sportsbook we already supply.”
“I expect the activity to be too large for a state to leave potentially billions of dollars untaxed for long,” he added.
Locke told investors that a substantive victory for prediction market platforms at the U.S. Supreme Court would settle which laws apply to sports-event contracts offered on CFTC-registered exchanges.
However, Locke said it would leave product rules, taxes, and consumer safeguards open, for which the CFTC is already proposing a more detailed framework for event contracts.
In his letter, Locke credited prediction markets with bringing new liquidity into sports betting, as well as new customers, most of them in states that don’t have legal online products.
“That liquidity is here to stay,” Locke said. “The prediction markets of today are very unlikely to look like the prediction markets of tomorrow. The rules on access, tax, and product will move and some of today’s advantages will move with them.”
NFL’s cautious approach to prediction markets
Major League Baseball has partnered with Polymarket and the U.S. Open has partnered with Kalshi, but the National Football League (NFL) has taken a more cautious approach to any deal with a prediction market company.
NFL Commissioner Roger Goodell admitted he could be open to an arrangement with prediction markets if conditions are met. In a recent interview with CNBC, Goodell supported stronger regulations for prediction markets.
“We want to see that to protect the integrity of our game,” Goodell said. “We want to make sure we’re protecting the consumers that are on those platforms for the NFL.”
Goodell added that the league’s position shouldn’t be a surprise to anybody.
“We think that there needs to be stronger regulations into prediction markets,” the commissioner told CNBC.
The NFL has also prohibited all prediction market advertising during its televised games and even from its in-stadium signage.
While,the National Hockey League has established partnerships with Kalshi and Polymarket, the National Basketball Association has no deal with prediction markets, also expressing integrity concerns.
