Underdog's five-state lawsuit opens a second federal preemption front

Jeremy Levine made two moves in the same week. He surrendered Underdog's daily fantasy sports licences in seven states, then filed federal lawsuits in five of them. The sequence matters more than either decision on its own.

The suits, filed in Ohio, Massachusetts, Wisconsin, New Mexico, and Washington, ask each district court to permanently enjoin state regulators from exercising jurisdiction over Underdog's event contracts. The legal theory is the one Kalshi has been running for months: CFTC-designated contract markets sit under exclusive federal jurisdiction, and state gambling statutes cannot reach them. The Supremacy Clause argument is identical. The filing strategy is not.

Kalshi sued states reactively, typically after a governor made a public statement or an attorney general filed first. Underdog has filed preemptively, in jurisdictions where enforcement is threatened but has not yet landed. That is a meaningful tactical difference. A preemptive declaratory judgment action lets Underdog choose the venue, control the timing, and frame the question before the state does. Whether those advantages survive contact with a hostile district court is a different matter — Ohio's federal bench has already ruled that platforms like Kalshi are gambling operations subject to state law, which makes that particular filing a long shot by any measure.

What the five lawsuits collectively test is whether the preemption argument can be separated from Kalshi's specific legal record. Kalshi's swap claim — the basis for its strongest federal jurisdiction argument — covers less than one percent of its actual contracts. That gap has been visible to every court that has examined it, and it has cost Kalshi injunctions in Utah, Connecticut, Nevada, and the 10th Circuit. Underdog's contracts may have a different composition, or Levine may be betting that a different plaintiff presenting the same theory in front of different judges produces different results. That bet is not irrational. Federal circuit splits happen precisely because district courts in different jurisdictions weigh the same statutory text differently, and the Supreme Court has not yet resolved the core question.

The DFS licence surrenders are the part of this I find underweighted in the coverage. Giving up operating licences in Massachusetts, Maryland, Michigan, Mississippi, New Jersey, Pennsylvania, and Ohio is not a cost-cutting measure. It is a legal position. A company holding state gambling licences while arguing that state gambling law cannot touch its products faces an obvious standing problem: if the states have no jurisdiction, why did you apply for their licences? Levine appears to have decided that the licences were a liability to the preemption argument, not an asset to the business. That calculation suggests his legal team believes the federal theory is strong enough to win without the regulatory relationships that DFS built.