Underdog is asking a federal court to stop Tennessee from applying its gambling laws to the company’s sports event contracts, despite a recent appeals ruling against similar arguments from Kalshi. Sam McQuillan reports for Legal Sports Report that the company sued on October 13, following an October 9 cease-and-desist letter from the Tennessee Sports Wagering Council. The letter threatened potential civil penalties, criminal investigations and revocation of Underdog’s fantasy-sports license; the article does not report that those penalties have been imposed.
The dispute concerns whether federal derivatives oversight displaces state gambling law. Underdog argues that its exchange falls within the Commodity Futures Trading Commission’s exclusive jurisdiction and that Tennessee’s enforcement violates the Constitution’s Supremacy Clause. State regulators view the sports contracts as unlicensed sports betting. Calling the product a prediction market does not settle which authority can regulate it; that is the question the company is litigating.
Tennessee has a significant appellate ruling behind it. In September, the Sixth Circuit overturned an injunction shielding Kalshi from the state’s regulators, finding that sports event contracts likely did not qualify as swaps under federal commodities law. It also held that even if they did qualify, federal law would not prevent Tennessee or Ohio from enforcing their laws. McQuillan notes that the decision binds federal courts in Tennessee. Underdog’s filing is therefore a new challenge, not a reported victory or a reversal of that precedent.
The consumer stakes extend beyond which agency receives the paperwork: the outcome determines whether Tennessee can enforce its sports-wagering rules against this product. If the company wins its jurisdictional argument, the state loses that route to oversight; that would not itself establish that the product is safe or unsafe. Tennessee is the seventh state Underdog has sued over prediction-market enforcement, according to the report. Conflicting court outcomes elsewhere leave the broader issue unsettled, while customers continue to encounter sports wagers presented as financial contracts.