Underdog asks Nashville court to block Tennessee enforcement

Underdog filed its complaint in the U.S. District Court for the Middle District of Tennessee on Tuesday, naming Attorney General Jonathan Skrmetti and members of the Tennessee Sports Wagering Council. The company had received a cease-and-desist order threatening fines, civil penalties, criminal investigation, and revocation of its fantasy sports licence if it did not stop offering sports-event contracts in the state. Its response was to sue.

The legal argument is the one Underdog has been running across seven states now: that the Commodity Futures Trading Commission holds federal jurisdiction over event contracts, and that state gaming law cannot reach what federal commodity law already covers. Tennessee's position is the mirror image — that the Sixth Circuit's ruling in late September, which found that state gaming regulators in Tennessee and Ohio may apply their own laws to prediction market platforms, settles the matter in their favour.

It does not settle the matter. What the Sixth Circuit ruling did was give state regulators a legal instrument. What it did not do was produce a stable equilibrium. Underdog is now asking a district court in Nashville to override enforcement while the underlying question remains unresolved at the federal level, and the Supreme Court has not taken up any prediction market case. The company describes its position as a Hobson's choice — comply and lose the business, resist and face criminal exposure — which is a reasonable description of what happens when two regulatory frameworks claim the same territory simultaneously.

The piece of this that the state-by-state coverage tends to understate is what the litigation pattern itself signals. Underdog has now sued Washington, Connecticut, Massachusetts, New Mexico, Ohio, Wisconsin, and Tennessee. Crypto.com and Novig have sued Missouri. Kalshi, Polymarket, and Robinhood have not joined that Missouri action. That divergence is worth sitting with. The platforms holding back are not necessarily more confident in the federal preemption argument — they may simply be running a different calculation about which courtrooms they want to lose in first.

Because losing at the district level, and then at the circuit level, and then petitioning for certiorari is the path to the Supreme Court. You do not get the Court's attention by winning in Nashville. You get it by accumulating a circuit split that the Court cannot responsibly ignore. What looks like a string of expensive defeats may be the strategy, not the failure of one.

The S&P Global survey published alongside all of this shows that sports-event contracts account for roughly seventy percent of prediction market trading activity among people who use these platforms at all. The regulatory fight is, structurally, a fight about whether a sports betting product that is federally chartered can coexist with state sports betting licensing regimes. Every state that has a sportsbook tax revenue line has an answer to that question, and the answer is no.