Underdog Files Lawsuit to Prevent Tennessee Crackdown

Underdog isn’t exiting the Volunteer State without a fight.

The prediction market operator has filed a lawsuit against the Tennessee Sports Wagering Council. In it, Underdog asks a court to grant a temporary injunction against the regulator, which issued a cease-and-desist letter ordering the operator to halt sports markets on October 9. This would allow it to continue operating sports markets while its legal challenge plays out.

Underdog’s lawsuit follows a similar one Kalshi filed against state regulators in Tennessee and Ohio. However, the US Court of Appeals for the Sixth Circuit rejected the lawsuit, paving the way for the states to begin enforcing gambling regulations. 

While the US Supreme Court has been asked to review the legality of sports prediction markets, that ruling could take months to come down. As a result, the Sixth Circuit's ruling creates a legal precedent that will likely doom Underdog’s lawsuit early on.

Tennessee is the seventh state to be sued by Underdog, joining the following states:

• Connecticut

• Massachusetts

• New Mexico

• Ohio

• Washington

• Wisconsin

If Underdog fails to secure an injunction, the TSWC will fine and penalize it until it stops offering sports contracts and exits or joins the Tennessee online sports betting market. 

Prediction Platforms Face Dire Future

SCOTUS has yet to weigh in on sports prediction markets, meaning we don’t know who will end up with regulatory authority over the industry. However, more and more lower courts have rejected the industry's arguments. This is a troubling sign for an industry that has spent massive amounts of money on sponsorship deals, marketing, and legal fights.

The intense defense of sports contracts stems from the fact that they account for the vast majority of volume on most platforms. Some are sports-only options, but others cover markets like culture, finance, and politics.

Underdog previously tried to offer a regulated sportsbook but abandoned the effort to launch Underdog Exchange.

If SCOTUS decides that states can regulate sports markets, it would increase costs, add new regulations, and erase the industry's advantages over regulated sports betting. With so much money already sunk into protecting sports markets, several operators, including Underdog, could see devastating financial losses that they may never recover from.