Underdog sues five states over sports event contracts after surrendering DFS licences
The operator seeks federal injunctions and a finding that state gambling laws cannot be applied to its CFTC-regulated products.
US.- Underdog has filed federal lawsuits in Ohio, Massachusetts, Wisconsin, New Mexico and Washington seeking to stop the states from enforcing gambling laws against its sports event contracts. The complaints, filed in the US district court in each state, ask for a permanent injunction barring enforcement of state gambling or wagering statutes against Underdog’s prediction market services.
The company also seeks a declaratory judgement that the challenged provisions, and any other state gambling laws as applied to those services, violate the Supremacy Clause and are unconstitutional, plus any further relief the courts consider appropriate.
Stacie Stern, Underdog senior vice president of government affairs and partnerships, said: “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.”
Underdog said it selected states that have already taken legal action against other prediction market operators. In the filings, the company said the Commodity Futures Trading Commission (CFTC) has exclusive jurisdiction to regulate trading on designated contract markets and that Underdog has completed CFTC approval procedures to offer and facilitate event contracts.
The Massachusetts complaint points to an enforcement action by the state’s attorney general against Kalshi. A court granted a preliminary injunction barring the operator from offering sports-related event contracts to people in Massachusetts, an order later stayed pending appeal. Underdog said any comparable enforcement against its federally regulated market would be without merit and that the CFTC has taken the position that state gambling enforcement against CFTC-designated contract markets violates the Supremacy Clause.
The suits follow Underdog’s decision to surrender daily fantasy sports licences in Massachusetts, Maryland, Michigan, Mississippi, New Jersey, Pennsylvania and Ohio. Jeremy Levine, Underdog chief executive and founder, said new Drafts entries in those states would stop after NFL kick-off today. Contests already entered will continue as normal.
Levine said the seven states had told Underdog it could not offer both daily fantasy sports and CFTC-licensed products.
