Underdog has filed suit in federal court in Tennessee seeking to block enforcement of state wagering laws against its event-contract exchange. The company, which IG Group is acquiring, argues that its platform is regulated by the federal Commodity Futures Trading Commission and that the state cannot treat the contracts as wagers.
Underdog Exchange DCM Inc. and UDM LLC filed the suit against Tennessee Attorney General Jonathan Skrmetti and the state's Sports Wagering Council. The state issued a cease-and-desist order, claiming Underdog's contracts fall under the Tennessee Sports Gaming Act and require a council licence. Nine licensed operators currently hold permits in the state.
Underdog contends that its Designated Contract Market status gives the CFTC exclusive jurisdiction under the federal Commodity Exchange Act, and that the constitutional doctrine of federal preemption bars enforcement of Tennessee law. The company is seeking a declaration that state law does not apply to the exchange and a permanent injunction against enforcement.
Underdog's position is complicated by a September ruling from the Sixth Circuit Court of Appeals. In a case against Ohio and Tennessee, the court held that Kalshi had not proved the CFTC holds exclusive jurisdiction over sports contracts and that federal law does not preempt state authority to regulate wagering. That decision is binding on federal courts in Tennessee. The Third Circuit in New Jersey sided with Kalshi, and the Ninth in Nevada recognised federal preemption but denied an injunction.
Tennessee is the seventh state Underdog has sued. The company has previously filed against Massachusetts, New Mexico, Ohio, Washington, Wisconsin and Connecticut. Three petitions in related disputes are pending before the US Supreme Court, including New Jersey's appeal in the Kalshi case and Robinhood's petition from Nevada.
