Underdog Fantasy Sues Five States Over Prediction Market Rules
Underdog Fantasy filed lawsuits against five states on September 8 — Massachusetts, New Mexico, Ohio, Wisconsin, and Washington — seeking to block them from regulating its sports-related prediction market contracts under state gambling law. The company argues those contracts are derivatives regulated exclusively by the federal Commodity Futures Trading Commission (CFTC), not state gaming regulators, putting Underdog alongside Kalshi and other prediction-market operators in an escalating legal fight that has been playing out state by state through 2026.
A pivot away from daily fantasy sports
The filings mark a strategic shift for Underdog, which built its business on daily fantasy sports (DFS) contests before moving into prediction markets. As part of that shift, the company has surrendered its DFS operating licenses in seven states — Maryland, Massachusetts, Michigan, Mississippi, New Jersey, Ohio, and Pennsylvania — clearing the way to argue that its current sports-related contracts are federally regulated financial products rather than state-licensed gambling.
Underdog's senior vice president of government affairs, Stacie Stern, described the current legal landscape bluntly: "With cases and divergent rulings across the country, everyone can see what's happening in our industry: it's a mess." That "mess" is the same patchwork of conflicting state and federal rulings that has already produced injunctions, court orders, and state lawsuits against Kalshi in Michigan, Washington, Nevada, New Jersey, and Connecticut over the past several weeks.
Timed to the start of the NFL season
The lawsuits land just as the 2026 NFL regular season gets underway — historically the highest-volume stretch of the year for both licensed sportsbooks and prediction-market platforms. The American Gaming Association projects $29.5 billion in regulated sportsbook wagers during this NFL season, a figure that underscores how much is riding on how the prediction-market legal fight ultimately resolves for both sides of the industry.
For bettors, the practical effect for now is regional and unsettled: access to prediction-market sports contracts can change abruptly depending on which state a customer is in and which way the latest court ruling has gone, a very different experience from the stable, state-licensed sportsbook market bettors are used to. Nothing about this dispute changes the legal status of licensed sports betting itself — see our sports betting guides for how standard, state-regulated wagering works.