Underdog sues Connecticut to block sports prediction market crackdown
Underdog asks a federal court to block Connecticut's order
Sports gaming company Underdog has sued Connecticut officials in federal court. It wants to stop the state from treating its sports-related event contracts as illegal gambling.
Prediction markets let people buy contracts that pay out based on the result of a future event, such as a sports game. Underdog says its contracts should be overseen by the federal government, not by state gambling regulators.
The key facts
- Underdog filed the lawsuit on Tuesday, asking the court for declaratory and injunctive relief so it can keep operating in Connecticut.
- The company says it runs a federally regulated designated contract market (DCM), a type of exchange overseen by the Commodity Futures Trading Commission (CFTC).
- Underdog argues the CFTC has "exclusive jurisdiction" over trading on DCMs, which would make any state enforcement action "meritless."
- Last week, the Connecticut Department of Consumer Protection (DCP) sent cease-and-desist orders to nine prediction market platforms. Five are named in the reporting: Underdog, Polymarket, Coinbase, Crypto.com and Robinhood.
- Earlier this month, Underdog also sued five other states over the same issue: Ohio, Massachusetts, Wisconsin, New Mexico and Washington.
What Underdog argues in the lawsuit
Underdog says Connecticut's order to block its event contract offerings is "additionally preempted" because it directly conflicts with the Commodity Exchange Act, the federal law that governs derivatives trading. The company's position is that federal CFTC oversight leaves no room for state enforcement against its market.
What Connecticut says
DCP Commissioner Bryan Cafferelli said the state's laws are clear: sports betting may only be offered by legal, licensed sportsbooks that follow state regulations and technical standards.
Connecticut also sued Kalshi last month to block that platform from offering sports event contracts, in what the report describes as a months-long legal fight. The state is among more than a dozen that have taken enforcement action or filed lawsuits against prediction market platforms over sports event contracts.
Who Underdog is
Kalshi and Polymarket are larger than Underdog in the prediction market sector, according to the report. The UK's IG Group announced in July that it is acquiring Underdog for up to $1.3 billion. In March 2025, Underdog raised $70 million in a Series C funding round at a $1.23 billion valuation.
What is confirmed
The lawsuit has been filed, and Connecticut's cease-and-desist orders to the nine platforms were issued last week. Underdog's legal arguments and Cafferelli's statement are confirmed from the reporting and the state's announcement.
What is still unclear
The court has not yet ruled, so it is unknown whether Underdog will be allowed to keep offering its contracts in Connecticut while the case proceeds. The reporting names only five of the nine platforms that received orders; the other four are not identified. The sources also do not say how the pending IG Group acquisition may be affected.
Why this matters
The dispute centers on who regulates sports prediction markets: the federal CFTC or state gambling authorities. The outcome could affect whether major crypto and trading platforms, including Polymarket, Coinbase, Crypto.com and Robinhood, can offer sports event contracts in states that treat them as betting. With more than a dozen states taking similar action, the Connecticut case is part of a wider nationwide conflict.