Underdog has filed lawsuits in five states seeking to preemptively block them from trying to shut down its sports-event contracts, a decision that was made after the company surrendered its daily fantasy sports (DFS) licenses in seven states.
The lawsuits were filed in Ohio, Massachusetts, Wisconsin, New Mexico, and Washington state. Each of the states is already involved in litigation with other prediction-market companies, such as Kalshi and or the Commodity Futures Trading Commission (CFTC) or both.
Each of the lawsuits seeks to prevent state gaming regulators or attorneys general “from unlawfully exercising jurisdiction over, regulating, or terminating Underdog’s offering of lawful derivatives contracts on federally regulated markets.”
The company is asking for a “permanent injunction” and requests that each respective court enter a declaratory judgment stating the challenged provisions, or any other state laws pertaining to gambling or wagering as applied to Underdog’s prediction markets, violate the Supremacy Clause of the U.S. Constitution.
In the lawsuits filed in district courts for each state, Underdog claims they now face the imminent threat that each state will enforce their gambling and gaming statutes against its federally regulated market.
According to each lawsuit, the CFTC has “exclusive jurisdiction” to regulate trading on designated contract markets. The company said it has fully complied with CFTC-approval procedures, authorizing them to legally offer and facilitate the trading of event contracts in these five states.
Messages left with Underdog seeking comment were not returned Wednesday.
Currently, Kalshi has been largely barred from operating in Washington state, following a judge’s preliminary-injunction ruling that found them in violation of state gambling and consumer-protection laws. It’s a similar case in Massachusetts, where Kalshi is heavily restricted while a legal case proceeds.
The CFTC has sued Wisconsin in response to the state’s lawsuit against Kalshi and a federal judge in Ohio ruled that Kalshi and similar platforms are gambling operations and must comply with state gaming laws.
Three New Mexico pueblos and one tribe wrapped up their closing arguments on Tuesday that a federal judge should prohibit Kalshi from offering sports-event contracts and other prediction markets on sovereign tribal lands.
The legal challenges and appeals remain ongoing in all five states.
Underdog surrenders seven state DFS licenses
The lawsuits were filed several days after Underdog CEO and Founder Jeremy Levine announced the decision to shut down their DFS offerings in seven states following the NFL’s kickoff on Wednesday.
Underdog has surrendered its DFS licenses in Massachusetts, Maryland, Michigan, Mississippi, New Jersey, Pennsylvania, and Ohio. Already-entered drafts will continue as normal, but in those states, you won’t be able to enter new drafts, Levine said. Levine explained his decision in a post on X.
“Those states have taken the legal viewpoint we disagree with,” Levine said. “If we off our CFTC-licensed products we cannot offer fantasy sports in those states. So, we had to choose. We could keep our fantasy licenses in those states or surrender the licenses and offer effectively our full experience, minus drafts.”
Levine said they have some idea about how to bring back drafts, but it was too early to commit to anything yet.
