Underdog Sues Five States and Surrenders DFS Licenses in Seven to Keep Prediction Markets

Underdog has filed pre-emptive lawsuits in five states while surrendering its daily fantasy sports licenses in seven, shutting new drafts out of those markets right after the NFL’s Wednesday kickoff.

Chief executive and founder Jeremy Levine announced the shutdown in a post on X on September 5. “If we offer our CFTC-licensed products we cannot offer fantasy sports in those states. So, we had to choose,” he wrote. “We could keep our fantasy licenses in those states or surrender the licenses and offer effectively our full experience, minus drafts.”

The choice

Levine said the states in question take the legal position that a company cannot offer both CFTC-licensed products and fantasy sports there. Underdog chose the prediction markets. Drafts closed to new entries in Massachusetts, Maryland, Michigan, Mississippi, New Jersey, Pennsylvania and Ohio after Wednesday’s NFL kickoff, and drafts already entered continue as normal. He apologized to players in the affected states and said the company has ideas for bringing Drafts back, but no committed timeline yet.

The lawsuits

Separately, Underdog has reportedly filed suits in Ohio, Massachusetts, Wisconsin, New Mexico and Washington seeking to block state regulators or attorneys general from shutting down its sports-event contracts. The company asks for a permanent injunction and a declaratory judgment that state gambling laws, as applied to its prediction markets, violate the Supremacy Clause of the U.S. Constitution. It argues the CFTC has exclusive jurisdiction over trading on designated contract markets and that it complied with the approval procedures needed to offer event contracts in the five states.

Those five states are already litigating prediction markets. A federal judge in Ohio ruled that Kalshi and similar platforms are gambling operations subject to state gaming laws. Kalshi is largely barred in Washington and heavily restricted in Massachusetts, the CFTC has sued Wisconsin in response to the state’s suit against Kalshi, and New Mexico tribes wrapped closing arguments this week seeking to bar Kalshi from tribal lands.

Messages left with Underdog seeking comment were not returned Wednesday.

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