Underdog drops fantasy sports in seven states, sues five to protect prediction markets
Underdog has surrendered its daily fantasy sports licenses in seven states and filed federal lawsuits against Massachusetts, New Mexico, Ohio, Washington, and Wisconsin on September 8. CEO Jeremy Levine said the company was forced to choose between state fantasy licenses and its CFTC-regulated prediction markets, choosing the latter. The lawsuits seek permanent injunctions blocking state gambling enforcement against its sports event contracts. Underdog acquired the Aristotle Exchange DCM earlier this year and began offering prediction markets in September 2025 through a partnership with Crypto.com.
Underdog's surrender of seven state fantasy licenses signals that dual-state-federal operation is no longer sustainable for prediction-market platforms. The five lawsuits ask courts to bar enforcement actions before they start, but they arrive after Kalshi already lost parallel preemption fights in Nevada and Utah. Each platform now faces the same strategic trap: state gambling commissions move faster than federal courts, and every loss emboldens the next attorney general.
Underdog's legal spend will compound across five cases while its national product fragments. Massachusetts or any other state wins an injunction, the geofence cascade that threatens Kalshi becomes industry-wide. The Tenth and Ninth Circuit rulings against Kalshi give state judges precedent to follow, not pause. Underdog's preemption shield collapses across multiple circuits mirrors the exposure Kalshi already faces.
Becomes the third CFTC-registered prediction-market platform forced into state-by-state legal defense after Kalshi's losses in Nevada and Utah, as the preemption shield collapses across multiple circuits and platforms alike.