Underdog loses bid to move Tennessee lawsuit to different court

Underdog's Tennessee suit lands in a jurisdiction that already ruled against it

In late September, the Sixth Circuit told Tennessee and Ohio that their gaming regulators could apply state law to prediction market platforms. Underdog lost that ruling. On October 19, it filed a new complaint in the US District Court for the Middle District of Tennessee, in Nashville, naming the state's attorney general Jonathan Skrmetti and members of the Tennessee Sports Wagering Council as defendants. The company is now litigating inside the jurisdiction that just ruled against its legal theory.

The complaint frames the situation as a Hobson's choice: comply with state gaming law and abandon the business model, or resist enforcement and absorb the regulatory damage. That framing is legally useful but strategically it reveals how little running room Underdog has. A company with a stronger federal preemption argument would not need to describe both options as forms of irreparable harm.

What makes this filing more significant than the headline suggests is where it sits in the broader map. The CFTC has issued an interim rule and proposed a classification framework for sports event contracts. That should, in theory, be the instrument Underdog leans on. But state regulators are treating CFTC guidance as advisory rather than dispositive, and the Supreme Court has not moved to correct them. The Sixth Circuit ruling did not close the question — it handed it back down the chain without resolution. Underdog is filing in Nashville because Nashville is where the next procedural move is available, not because Nashville is where the argument is strongest.

I think the consensus read on this — that the state-by-state attrition eventually forces a Supreme Court intervention — is probably right in direction but wrong on timing. The Court has passed on these cases before. It will pass again unless a circuit split sharpens to a point where inaction itself becomes a ruling. That has not happened yet. What exists now is a Sixth Circuit precedent that cuts against federal preemption, and a company burning legal fees on a front it already lost once.

My own bias runs toward downside scenarios, and I want to be transparent that I am adjusting for it here. The bullish read on Underdog's position is that the Nashville court could issue a preliminary injunction before any enforcement action lands, buying the company enough time for the federal picture to clarify. That outcome is possible. The CFTC's proposed classification framework, if it firms into a final rule, changes the preemption calculus in ways the Sixth Circuit did not have before it.

But a final rule is not a final rule until it is, and Skrmetti has shown no inclination to wait.

Prediction markets exist for the Tennessee enforcement question. The market worth watching is not whether Underdog wins this suit — it probably does not — but whether a preliminary injunction buys enough calendar time for federal rulemaking to catch up. Those are different questions, and right now the market is pricing them as one.