Underdog files Nashville suit after Sixth Circuit loss

Scott Kaufman-Ross sent a memo to sportsbook partners on a Friday. By the following Sunday, Underdog had filed a federal complaint in Nashville. These two events are not directly connected, but they share the same underlying condition: nobody with authority to settle the question of what prediction markets are, legally speaking, has done so.

The NBA's memo is the cleaner story to tell. Jontay Porter left a game after three minutes. Terry Rozier left after nine. In both cases, people who knew this would happen placed money on statistical unders before it did. Kaufman-Ross named both cases explicitly as inputs to the new restrictions — parlays on multiple unders for the same player, bets on opening-tip winners, wagers on players expected to log fewer than twelve minutes. The league's authorised sportsbook partners, which the NBA estimates handle more than ninety-nine percent of U.S. betting volume on its games, were told to stop offering these markets.

That number matters. When a single distribution channel controls that share of volume, a league memo functions like a regulation. The sportsbooks didn't negotiate. They complied.

Underdog is in a different position entirely. The Sixth Circuit ruled in late September that Tennessee and Ohio gaming regulators may apply state law to prediction market platforms. Underdog's response was to file against Tennessee's attorney general and the Tennessee Sports Wagering Council in the Middle District of Tennessee, arguing that federal preemption — specifically the CFTC's authority over event contracts — renders state enforcement an imminent threat to its business. The complaint uses the phrase "Hobson's choice": comply with state gaming law and lose the federal argument, or resist and face enforcement. Either path causes irreparable harm.

I have watched enough of these jurisdictional fights to recognise the structure. The state wins the early rounds because it is the one bringing enforcement actions. The federal challenger wins when it can get a judge to issue a preliminary injunction that freezes the action while the preemption argument is heard properly. The CFTC's interim rule and proposed classification of sports event contracts give Underdog something to point to, but the Supreme Court's continued silence means there is no ceiling on this fight. Each ruling at the circuit level is authoritative in its circuit and nowhere else.

The consensus read on the Nashville filing is that it is another losing battle in a war of attrition — that without Supreme Court intervention, Underdog is buying time. I think that framing is too static. The CFTC's proposed classification, if it survives the rulemaking process, changes the preemption argument's weight at every district court where this is being litigated simultaneously. Underdog's Nashville complaint lands while that rulemaking is still open. A judge who sees a completed federal rule on her docket looks at state enforcement differently than one who sees only an interim guidance document.

The NBA restriction story will close quickly. The question it resolves — whether the league can effectively prohibit a class of bets — was answered in a memo, and the answer was yes. Underdog's story will not close quickly, and the markets that exist on its resolution are pricing a state-by-state grind rather than a federal inflection point. That is the gap I find interesting.