Sixth Circuit ruling leaves Underdog fighting on a seventh front

In late September, the Sixth Circuit handed state gaming regulators something they had been waiting for: a ruling that Tennessee and Ohio may apply their own gaming laws to prediction market platforms operating within their borders. Underdog filed its complaint in the U.S. District Court for the Middle District of Tennessee inside three weeks.

The complaint names Tennessee Attorney General Jonathan Skrmetti and members of the Tennessee Sports Wagering Council. Underdog's theory is the one that has animated every version of this fight: that the CFTC's regulatory authority over event contracts under the Commodity Exchange Act displaces state gaming law by operation of the Supremacy Clause. Tennessee's theory is the opposite. The Sixth Circuit, for now, has sided with Tennessee.

What makes the Nashville filing different from the six that preceded it is the frank acknowledgment of what losing looks like. Underdog's complaint describes a "Hobson's choice" in which compliance and non-compliance both produce irreparable harm. That framing is not rhetorical. It is a request for preliminary injunctive relief, and it requires the company to show that no adequate remedy at law exists. Federal courts grant that relief sparingly. The Sixth Circuit's September ruling sits in the same circuit as the Nashville court, and district judges notice that.

The consensus read on this litigation is that it resolves when either the Supreme Court takes a prediction markets case or Congress acts. I don't think that's where this lands in the near term, and here is why. The Supreme Court has declined to intervene in the prediction market cases that have reached it, and the current legislative environment has not produced the kind of unified industry pressure that typically moves federal preemption questions onto a congressional calendar. What the Nashville filing actually represents is a company calculating that buying time through successive injunctions is worth more than waiting for a definitive ruling that may not come before the business damage becomes permanent.

The CFTC's interim rule and proposed classification of sports event contracts did not resolve the state-federal boundary question. It articulated a federal position. State regulators read that position and continued enforcing their own laws. Google's advertising restrictions in five states — including states that have active litigation against prediction market operators — suggest that commercial partners are not waiting for legal clarity before making their own risk assessments.

The preemption doctrine that Underdog is invoking traces to the Supremacy Clause and has been applied in financial services contexts where federal regulatory schemes were found sufficiently comprehensive to occupy the field. The relevant standard asks whether Congress intended federal law to be exclusive, whether state law conflicts with federal law, or whether compliance with both is impossible. Each of those prongs is contested here, and the Sixth Circuit's ruling does not close any of them permanently — it holds, for now, that state enforcement may proceed while the underlying question remains open.