The prediction-market operator wants a federal judge in Nashville to block the state's enforcement, arguing that federal commodity law preempts it. Ohio, which Underdog is already suing, saw its deadline for 10 platforms to stop offering sports contracts arrive Friday.
Underdog has gone to court in Tennessee knowing the odds are against it there.
The company's prediction-market arms, Underdog Exchange DCM Inc. and UDM LLC, which operates as Underdog Predict, sued Tennessee Attorney General Jonathan Skrmetti and the members of the state's Sports Wagering Council in federal court in Nashville on Tuesday, Oct. 13. The suit asks for a declaration that the federal Commodity Exchange Act preempts Tennessee's gambling laws as applied to its contracts, and for a permanent injunction against enforcement.
The filing followed an Oct. 9 cease-and-desist letter from Tennessee that threatened fines of $10,000 to $25,000 per offense. Tennessee is the seventh state Underdog has sued since Sept. 8, after Massachusetts, New Mexico, Ohio, Washington, Wisconsin and Connecticut.
Losing on purpose, for now
Underdog acknowledges that the U.S. Court of Appeals for the Sixth Circuit, which covers Tennessee, rejected the same preemption theory on Sept. 25 in a case involving Ohio and Tennessee. A district court in Nashville is bound by that ruling.
The point of the suit is to preserve Underdog's appellate rights while three petitions on the question are pending at the U.S. Supreme Court. If the justices take a case and side with the industry, operators that have already sued will be positioned to benefit quickly.
Underdog's exchange has a regulatory history of its own. Underdog bought its exchange in March 2026. Formerly called Aristotle Exchange, it had won federal approval as a designated contract market six months earlier, and Underdog began offering contracts to Tennessee residents on Aug. 28.
Ohio's deadline
Friday was the deadline in Ohio. The Ohio Casino Control Commission had given 10 platforms until Oct. 16 to stop offering sports contracts in the state. In alphabetical order they are Coinbase, Gemini Titan, Moomoo, Novig, Plus500US, Polymarket US, ProphetX, Robinhood Derivatives, Underdog and Webull. Underdog's own suit against Ohio is already pending. No new response or lawsuit from the others had surfaced by Friday afternoon.
The federal side
Washington is moving in the industry's direction. CFTC Chairman Michael Selig said in a television interview on Thursday that such trades belong in the derivatives markets, under his agency's oversight. On Oct. 9, the CFTC proposed formally defining event contracts, including sports contracts, as swaps. On the other side, 39 states and the District of Columbia have filed a friend-of-the-court brief urging the Supreme Court to take up New Jersey's case.
A final answer is not close. Stephen Piepgrass, a lawyer at Troutman, said resolution by the Supreme Court is "very unlikely ... until at least the summer of 2027."
Market implications
One reading is that the industry is building a record for the Supreme Court. Suits like Underdog's, a CFTC that is expanding its definition of swaps, and multiple pending petitions make it likely the justices will eventually decide who regulates event contracts.
A second reading is that, in the meantime, states hold the advantage in much of the country. In the Sixth Circuit, the law is on their side, enforcement is under way in several states, and platforms that keep operating risk fines while they wait. Illinois is the exception: a federal judge there sided with Kalshi, Coinbase and the CFTC on Oct. 2.
For the brokerages on Ohio's list, the question is narrower: whether to switch off sports contracts in one state or follow Underdog into court.
What to watch
Any responses or lawsuits from the 10 Ohio recipients, Tennessee's reply to Underdog, the Supreme Court's handling of the pending petitions, including Kalshi's response due Nov. 9, and an Oct. 29 deadline for the parties' proposed injunction order in Illinois.