Underdog Sues Tennessee After Cease-and-Desist Notice

• Underdog this week filed a lawsuit against Tennessee Attorney General Jonathan Skrmetti
• The company filed the suit in response to a cease-and-desist order on Oct. 9 from the Tennessee Sports Wagering Council
• Tennessee is the seventh state Underdog has sued in the last two months

Underdog this week filed a lawsuit in U.S. District Court for the Middle District of Tennessee Nashville Division against Tennessee Attorney General Jonathan Skrmetti and the Tennessee Sports Wagering Council in response to a cease-and-desist notice the company received earlier this month.

The Tennessee Sports Wagering Council sent Underdog a cease-and-desist notice for its sports event contracts in the state. Underdog filed a lawsuit in response, seeking to prevent the Attorney General and the Sports Wagering Council (SWC) from “unlawfully exercising jurisdiction over, regulating, or terminating Underdog’s offering of lawful derivatives contracts on federally regulated markets.”

Underdog has now sued seven states to prohibit their gaming laws from affecting the operator’s prediction market contracts since the start of September.

Seeking Permanent Injunction

Underdog is seeking a permanent injunction against Tennessee regulators to prohibit them from enforcing their gambling laws against Underdog’s prediction market services. Underdog also requests the court enter a declaratory judgement stating the challenged provisions, or any other state laws pertaining to gambling or wagering as applied to Underdog’s prediction market services, violate the Supremacy Clause and are unconstitutional. Additionally, Underdog requests any other relief within the court’s discretion.

According to the lawsuit, the Tennessee SWC issued a cease-and-desist letter to Underdog, asserting its sports event contract offerings are “wagers” under the Tennessee Sports Gaming Act and the company is offering unlicensed sports betting in the state.

The letter warns that if Underdog does not cease its offerings, the operator will be susceptible to fines, civil penalties, loss of its fantasy sports operator licenses, and criminal investigations.

Any enforcement action against Kalshi would be meritless, the company asserts. The CFTC has confirmed its position that any state enforcement of its gambling laws against CFTC-designated contract markets violates the Supremacy Clause.

“In light of the imminent threat it faces as a result of Defendants’ intention to wrongfully enforce Tennessee law, Underdog brings this action to protect its right to offer event contracts pursuant to federal law and regulation, maintain the integrity of the federal regulatory framework, and avert imminent harm to its business operations,” Underdog counsel wrote in the lawsuit.

Underdog Files Suits in States That Have Taken Action

Underdog’s recent lawsuit in Tennessee follows a pattern of the company responding with legal action in state’s that have attempted to prohibit their sports event contracts. Underdog has filed lawsuits in Connecticut, Ohio, Massachusetts, Wisconsin, New Mexico, and Washington, seeking a permanent injunction against state gambling laws to prohibit their enforcement over its sports event contracts.

According to each lawsuit, the Commodity Futures Trading Commission (CFTC) has “exclusive jurisdiction” to regulate trading on designated contract markets. Underdog has fully complied with CFTC-approval procedures, authorizing the company to legally offer and facilitate the trading of event contracts in these states.