Underdog Sues Connecticut Over Sports Prediction Contracts
United States.- 22 September 2026 | www.zonadeazar.com Underdog has filed a federal lawsuit against Connecticut officials seeking to prevent the state from treating its sports-related prediction-market contracts as illegal gambling.
The case adds to the growing legal conflict between federal derivatives regulation and state sports-betting laws.
Request for Judicial Relief
Underdog is seeking declaratory and injunctive relief allowing it to continue offering its products in Connecticut.
The company is challenging enforcement action taken by the Connecticut Department of Consumer Protection, DCP.
Federal Jurisdiction Argument
Underdog’s central argument is that it operates within a federally regulated Designated Contract Market, DCM framework.
The company says the Commodity Futures Trading Commission, CFTC, has exclusive jurisdiction over trading conducted on DCMs.
Commodity Exchange Act
Underdog also argues that Connecticut’s enforcement action is pre-empted by the federal framework established under the Commodity Exchange Act.
Its position is that state gambling law cannot be used to regulate contracts already covered by federal commodities regulation.
Connecticut’s Position
State regulators take a different view.
Connecticut considers sports event contracts to function as sports wagers and says they may only be offered through licensed sportsbooks operating under state gambling law.
Cease-and-Desist Orders
The lawsuit follows cease-and-desist orders issued by the DCP to nine prediction-market platforms.
They include:
- Underdog.
- Polymarket.
- Coinbase.
- Crypto.com.
- Robinhood.
- ProphetX.
- Novig.
- Webull.
- Gemini.
State Requirements
Connecticut ordered those businesses to stop:
- Advertising sports event contracts.
- Promoting them.
- Offering them to Connecticut residents.
The state also required that customers retain access to withdraw their funds.
Bryan Cafferelli Defends State Regulation
DCP Commissioner Bryan Cafferelli has argued that Connecticut law allows sports betting only through legal, licensed sportsbooks that comply with the state’s regulatory and technical standards.
The agency’s position is that sports prediction contracts should not escape those requirements simply because they are structured differently.
Consumer-Protection Concerns
Connecticut has also raised concerns over player protection.
Issues cited include:
- Age restrictions.
- Access by self-excluded individuals.
- Contracts involving collegiate sporting events.
- Regulatory controls.
- Technical standards.
Wider Investigation
The state has issued nearly 30 subpoenas as part of its investigation.
Recipients reportedly include payment processors, technology suppliers, media organisations and other businesses linked to the distribution or promotion of prediction-market products.
Ned Lamont on Consumer Protection
Governor Ned Lamont has also argued that prediction markets were operating outside Connecticut’s existing consumer-protection framework for sports betting.
That remains the state’s position and is being challenged by the companies involved.
Sports Contracts at the Centre of the Dispute
The legal conflict turns on how these products should be classified.
Courts are increasingly being asked whether a contract linked to the outcome of a sporting event should principally be treated as:
- A federally regulated financial product.
- Or a sports wager subject to state gambling law.
Growing Litigation
The Connecticut action is part of a broader national dispute.
During September, Underdog also filed lawsuits against:
- Ohio.
- Massachusetts.
- Wisconsin.
- New Mexico.
- Washington.
Those cases similarly challenge state enforcement against sports event contracts offered through prediction markets.
Connecticut Also Challenges Kalshi
Connecticut has separately sued Kalshi in an effort to stop the operator from offering sports event contracts within the state.
The regulatory dispute therefore extends well beyond Underdog.
Regulatory Federalism
The issue raises a wider question over the division of powers between federal and state authorities in the United States.
Prediction-market operators argue that federal oversight of designated contract markets pre-empts state intervention.
States taking enforcement action argue that gambling and consumer-protection laws remain applicable when the economic substance of a contract resembles sports betting.
No Uniform National Resolution
US courts have not yet established a single nationwide answer to the issue.
Similar cases remain active in multiple jurisdictions, with rulings varying according to the court and procedural stage.
Underdog’s Commercial Expansion
The litigation comes during an important period for Underdog.
IG Group announced in July that it would acquire the company for up to USD1.3 billion.
Underdog had previously raised USD70 million in a Series C round in March 2025 at a valuation of approximately USD1.23 billion.
Industry Context
Sports prediction markets have become one of the most closely watched regulatory issues in US gaming.
Their growth is creating an increasingly contested boundary between financial markets, event contracts and conventional sports wagering.
Next Steps and Impact
The federal court will now need to consider whether Connecticut can apply its sports-betting laws to Underdog’s contracts or whether the activity falls exclusively within federal jurisdiction.
The case forms part of a growing body of litigation that could shape the future regulatory treatment of sports prediction markets in the United States.
Its outcome will be relevant not only to Underdog, but also to other platforms, regulators, states and licensed sportsbook operators competing within an unsettled legal framework.
Editó: @fonta
