Underdog Sues Tennessee Over Prediction Market Gambling Restrictions

Underdog has filed a lawsuit against Tennessee to block the state from enforcing its gambling laws as they apply to the prediction market platform. 

This follows Kalshi's lawsuit against the Tennessee Sports Wagering Council on a similar premise, which a federal appeals court rejected. Underdog received a cease-and-desist from the TSWC on October 9, demanding it stop offering sports contracts or face consequences such as civil penalties, criminal investigations, or even the revocation of its fantasy sports license. 

As for Underdog, they're citing that they are federally regulated by the Commodity Futures Trading Commission, which is what all prediction platforms say. As for court battles, the Sixth Circuit Court of Appeals overturned an injunction that initially protected Kalshi in September, finding that sports contracts don't necessarily qualify as swaps. That same court also found that even if they were considered swaps, it wouldn't stop Tennessee or Ohio from enforcing their sports betting laws. That sets a precedent for federal courts in Tennessee. 

Underdog Lawsuit Follows Conflicting Federal Court Rulings

That said, opinions have been divided, with a federal judge in Illinois siding with Kalshi and saying they would likely qualify as swaps. The Third Circuit also favored Kalshi over New Jersey, and New Jersey is now petitioning the Supreme Court. 

Conversely, the Ninth Circuit sided with Nevada and California tribes in a situation against Kalshi. 

Underdog Now Faces Seven State Legal Battles Over Prediction Markets

With this lawsuit against Tennessee, Underdog's lawsuits now total seven. They also have suits against Connecticut, Massachusetts, New Mexico, Ohio, Washington, and Wisconsin. 

Underdog bought Aristotle Exchange earlier this year and is transitioning from fantasy sports and sports betting to a prediction-market platform. 

In addition to New Jersey petitioning the Supreme Court for an answer, 39 state attorneys general and the NFL have asked the Supreme Court to take the case.