Underdog Sues Five States Over Sports Event Contracts Just Days After Giving up DFS Licenses in Seven

• Underdog today filed lawsuits in five states seeking a prohibition of state laws against its prediction market offerings
• Underdog filed litigation in Ohio, Massachusetts, Wisconsin, New Mexico, and Washington
• This comes several days after Underdog announced it would be surrendering its DFS licenses in seven states

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Underdog today filed lawsuits in Ohio, Massachusetts, Wisconsin, New Mexico, and Washington, seeking a permanent injunction against state gambling laws to prohibit their enforcement over its prediction market products, namely sports event contracts.

Each of the lawsuits seek a “permanent injunction” against the states to prohibit them from enforcing their gambling laws against Underdog’s prediction market services. Underdog also requests each respective 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 courts discretion.

“We’re licensed by the federal government to offer markets, and we take our responsibilities as a federal exchange seriously and strictly comply with all regulations. Do we believe we are right on the law? Yes. Do we accept that these state gaming boards believe they are right on the law? Yes. We’ve worked with them, we respect them, and we didn’t want to sue, but sometimes it’s the only way to resolve a dispute. With cases and divergent rulings across the country, everyone can see what’s happening in our industry: it’s a mess. We need the Supreme Court to decide whether we’ll have one, enforceable federal standard or state-by-state regulation,” Stacie Stern, Underdog Senior Vice President, Government Affairs and Partnerships, told Sports Betting Dime.

National Framework Best For Customers

Underdog filed the lawsuits in states that have already taken legal action against other prediction market operators around the country. 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.

“Nevertheless, Underdog now faces the imminent threat that Defendants will enforce Massachusetts’s gambling and sports wagering statutes against its federally regulated market. Indeed, the Attorney General has already brought an enforcement action against KalshiEX LLC (“Kalshi”), a DCM, and obtained a preliminary injunction—since stayed pending Kalshi’s appeal—barring Kalshi from offering sports-related event contracts to any person located in Massachusetts,” Underdog counsel wrote in its Massachusetts lawsuit.

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.

“For Underdog, the product speaks for itself. We’ve proven we can build the best fan experience and delivered it responsibly under every legal regime imaginable. A consistent, national framework is what’s best for customers, but we’ll keep growing either way. To the states we’re litigating with: we want to keep working together and keep the lines of dialogue open. And regardless of outcome, we will always take care of our customers. We look forward to the Supreme Court resolving this. And whatever the result, we’ll keep offering sports fans the best products in the industry and in a responsible way,” Stern told Sports Betting Dime.

Underdog filed all five lawsuits in the respective district courts for each state.

Lawsuits After Letting Go Seven DFS Licenses

The lawsuits came several days after Underdog CEO and Founder Jeremy Levine announced the company would be shutting down its daily fantasy sports offerings in seven states following the NFL’s kickoff on Wednesday, Sept. 9.

Underdog will surrender its daily fantasy sports licenses in Massachusetts, Maryland, Michigan, Mississippi, New Jersey, Pennsylvania, and Ohio this week. Customers who have already entered draft competitions in those states will continue as normal, but no new competitions will be offered past Wednesday.

Levine noted the seven states have told Underdog they cannot offer both daily fantasy sports competitions and prediction markets in their jurisdictions. Massachusetts, Maryland, Michigan, New Jersey, Pennsylvania, and Ohio have all taken a hardline stance against prediction markets, each state filing lawsuits alleged prediction market sports event contracts are akin to illegal sports betting.

Mississippi has not filed any litigation against the prediction market industry, but Attorney General Lynn Fitch joined a bipartisan, multi-state coalition asking the federal government to allow states to regulate sports event contracts.

“This sucks, but I want to explain why. Those states have taken a legal viewpoint we disagree with: if we offer 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 on social media.

Drafts community, I have some not fun news to share. Right after kickoff on Wednesday, we will be shutting down Drafts in seven states: MA, MD, MI, MS, NJ, PA and OH. Already entered drafts will continue as normal, but in those states you won’t be able to enter new drafts. If…

— Jeremy Levine (@JerLevine) September 5, 2026