# Underdog Predict Sues Three States Over Prediction Market Regulation Legal battle escalates as fintech firm challenges state gambling laws on federally regulated markets. - **Source:** [ReadWrite](https://brifing.si/source/7a996b61-bc09-4e57-8483-78f2ad9dd914) - **Published:** 2026-09-08 - **Topic:** [Finance](https://brifing.si/c/finance) - **Original article:** - **On Brifing:** https://brifing.si/s/64a1365f-3d54-4fca-9c24-21b062382804 ## Legal Challenge Initiated Underdog Predict has filed federal lawsuits against Ohio, Massachusetts, and Wisconsin regulators after withdrawing its daily fantasy sports operations in seven states. The company argues its prediction markets fall under federal commodities law rather than state gambling regulations. This follows state regulators' claims that Underdog cannot simultaneously offer both prediction markets and DFS competitions within their jurisdictions. ## Ohio's Aggressive Stance In Ohio, Underdog sued Attorney General Andy Wilson and casino regulators, citing its status as a CFTC-regulated entity. The state previously proposed a $5 million penalty against rival Kalshi for unlicensed sports gaming. Underdog claims Ohio's enforcement leaves it with an impossible choice: risk massive liability or comply with what it argues are preempted state laws. An Ohio judge previously allowed enforcement against Kalshi to continue during litigation. ## Massachusetts Showdown Underdog's Massachusetts lawsuit targets AG Andrea Campbell and gaming officials, coming after the state secured an injunction against Kalshi's sports contracts. The company contends state intervention violates federal market rules and the Constitution's Supremacy Clause. Underdog maintains its event derivatives serve legitimate financial purposes like price discovery, distinguishing them from conventional sports betting. ## Wisconsin's Multi-Front Battle Wisconsin AG Josh Kaul has taken enforcement actions against multiple platforms including Kalshi and Polymarket, calling their activities 'thinly disguised' sports betting. The CFTC subsequently sued Wisconsin officials, with Chairman Michael Selig warning against state interference in federally regulated markets. Simultaneously, tribal gaming interests are pursuing claims that accessible sports contracts constitute class III gaming on tribal lands. ## Federal Circuit Split The legal landscape remains divided, with the Ninth Circuit ruling Kalshi's contracts were sports bets (allowing Nevada enforcement), conflicting with the Third Circuit's earlier pro-Kalshi decision against New Jersey. This growing federal-state split creates uncertainty for prediction market operators navigating between commodities regulations and state gambling laws. ## Regulatory Preemption Argument Underdog seeks permanent injunctions and declarations that federal commodities law preempts state gaming restrictions. The company emphasizes its designation as a CFTC-regulated designated contract market and futures commission merchant. This positions its contracts under the Commodity Exchange Act rather than state gambling statutes. ## Industry-Wide Implications The outcome could reshape the prediction market landscape, determining whether these platforms operate as financial markets or gambling operations. With multiple platforms facing state actions and the CFTC actively defending its jurisdiction, the cases may ultimately require Supreme Court clarification on the boundaries between federal commodities regulation and state gambling enforcement. ## Broader Fintech Impact These lawsuits represent a critical test for fintech innovation at the federal-state regulatory intersection. The decisions could establish precedent for how emerging financial technologies navigate conflicting regulatory regimes, potentially influencing other sectors like crypto derivatives and online trading platforms facing similar jurisdictional challenges. ## Sources covering this story - https://readwrite.com/underdog-sues-ohio-massachusetts-wisconsin-prediction-market/ — --- _Summary written by Brifing from the original reporting. Copyright in the original article belongs to its publisher; read the full piece at the link above._