Underdog surrenders DFS licences to fight on federal ground

Jeremy Levine made the calculation out loud. Underdog would stop taking new daily fantasy sports entries in seven states the moment the NFL season began, surrendering licences it had spent years acquiring, because the company had decided the future it wanted could not coexist with the regulatory framework those licences required it to accept.

The five lawsuits filed simultaneously in Ohio, Massachusetts, Wisconsin, New Mexico, and Washington are the second half of that decision. Each complaint asks for a permanent injunction and a declaratory judgement that state gambling statutes cannot reach a CFTC-regulated designated contract market. The constitutional peg is the Supremacy Clause. The strategic logic is to land cases in jurisdictions already hosting active litigation — Massachusetts restricted Kalshi while an appeal proceeds, Washington effectively barred it after a preliminary injunction, Ohio produced a federal ruling that treated these platforms as gambling operations subject to state law — so that the emerging circuit split becomes impossible for the Supreme Court to decline.

Stacie Stern, Underdog's senior vice president of government affairs, put it plainly: the company believes it is right on the law, accepts that state gaming boards believe they are right on the law, and has concluded that five federal courts and eventually one Supreme Court argument are the only mechanism that resolves it.

The reporting treats this as an aggressive litigation posture. The posture is real, but the aggression is not quite the story. Levine surrendered the DFS licences first. That is the operative sequence. A company that believed it could win on preemption while retaining its state-licensed business would have litigated from that position. Underdog did not. It chose a clean constitutional argument over a hybrid commercial existence — which means it has decided the hybrid model is either legally untenable or strategically inferior to being the company that forces the definitive ruling.

From a previous position examining how institutional actors behave when they believe the formal resolution of a dispute is inevitable, the tell is usually this: a party that expects to win on the merits stops managing the relationship and starts building the record. Underdog has done both things at once. The lawsuits are record-building. The licence surrenders are relationship-severing.

The markets that exist on the Supreme Court's eventual treatment of CFTC preemption are mispriced in one specific direction. The conventional framing weights Kalshi's litigation as the primary vehicle, because Kalshi arrived first and has the most active docket. Underdog's five simultaneous filings in states already in play shift the probability of a circuit split arriving at the Court with multiple petitioners rather than one — which changes both the timeline and the political optics of the case. A single company seeking a federal override of state gambling authority looks like a corporate interest. Five companies and the CFTC itself make the same argument, and it starts to look like a structural question about federal preemption that the Court has reason to answer on its own terms.

Illinois is the outlier to watch, though not for the litigation. Representative Travis Weaver's HB 5811, which would strip the exchange wager definition and the tiered transaction tax from Illinois's Sports Wagering Act, is unlikely to move before the January 2027 session. But Weaver's own framing carries the risk the industry should price: if the tax begins generating revenue before it is repealed, it becomes politically durable regardless of its legal vulnerability. Illinois budgeted no revenue from the tax. That window will not stay open.