Underdog Sues Tennessee Over Prediction Market Regulations
United States.- 20 October 2026 | www.zonadeazar.com Underdog, the US sports betting, fantasy sports and prediction market company, has filed a federal lawsuit against Tennessee, seeking to prevent state authorities from applying gambling legislation to its sports-event contracts.
The lawsuit was filed on 13 October 2026 before the US District Court for the Middle District of Tennessee in Nashville.
The dispute centres on competing regulatory interpretations. Underdog maintains that its products fall under the federal supervision of the Commodity Futures Trading Commission (CFTC), while Tennessee authorities argue that the contracts must comply with state sports betting laws.
Tennessee Issues Cease-and-Desist Order
The lawsuit follows a 9 October cease-and-desist order issued by the Tennessee Sports Wagering Council.
The regulator considers sports-event contracts offered through prediction markets to constitute wagering activities subject to state legislation.
Potential consequences for Underdog include:
- Financial penalties for non-compliance.
- Civil enforcement measures.
- Possible criminal investigations.
- Potential revocation of its fantasy sports licence.
The lawsuit also names Tennessee Attorney General Jonathan Skrmetti and members of the state’s gambling regulator.
Underdog Defends Federal Jurisdiction
Underdog argues that contracts traded through federally authorised exchanges should be governed by US derivatives legislation.
According to the company, the Commodity Exchange Act establishes the CFTC’s regulatory authority and limits state intervention concerning these instruments.
The operator maintains that Tennessee’s enforcement measures pose an immediate threat to its business and customers.
Underdog is therefore seeking a judicial declaration establishing federal pre-emption and an injunction preventing the enforcement of state gambling restrictions against its platform.
These arguments remain contested and have not been accepted by the court in this proceeding.
Kalshi Ruling Creates Legal Challenges
The dispute follows a 25 September 2026 ruling by the US Court of Appeals for the Sixth Circuit.
In proceedings involving Kalshi, the court allowed Tennessee and Ohio regulators to continue enforcing certain state gambling provisions.
The decision represents an important precedent for Underdog’s new lawsuit.
However, the company maintains that its event contracts should remain subject to federal supervision.
The dispute illustrates the continuing uncertainty surrounding the relationship between prediction markets and state gambling laws.
Next Steps and Impact
Underdog’s lawsuit against Tennessee represents another development in the regulatory conflict between prediction market platforms and US state authorities.
The federal court will consider whether Tennessee’s enforcement measures should be restricted and examine the relevant jurisdictional arguments.
No final ruling in Underdog’s favour has been issued in this case.
The outcome could have implications for other platforms, including Kalshi and Polymarket, while contributing to the wider debate over the legal treatment of sports-event contracts in the United States.
For the iGaming industry, the case highlights the growing need for clearer boundaries between sports betting, financial derivatives and prediction markets.
Editó: @fonta
