Complaint Filed in Nashville Federal Court
Underdog, a sports betting and prediction market company, has filed a complaint against the state of Tennessee in the U.S. District Court for the Middle District of Tennessee in Nashville. The lawsuit challenges the state’s application of existing gaming laws to prediction markets, asserting that such regulations constitute an overreach that ignores federal preemption principles.
The complaint, first reported by The Tennessee Journal, names Tennessee Attorney General Jonathan Skrmetti and members of the Tennessee Sports Wagering Council as defendants. In the filing, Underdog argues that the threat of enforcement by these state entities poses a direct and imminent danger to its business operations and its users.
“The threat of Defendants’ attempted enforcement of Tennessee law poses a direct and imminent threat to Underdog’s business and its users, and leaves Underdog with a ‘Hobson’s choice’ wherein both its options will cause irreparable harm,” the company stated in the complaint. This legal maneuver seeks to establish that federal authority, rather than state gaming statutes, governs the classification and regulation of prediction market products.
Sixth Circuit Decision Fuels Jurisdictional Conflict
The filing follows a late-September ruling by the Sixth Circuit Court of Appeals that intensified the regulatory dispute. The appellate court determined that gaming regulators in Tennessee and Ohio may leverage state gaming laws to enforce rules against prediction market platforms. This decision provided state authorities with a legal basis to treat prediction markets similarly to traditional sports wagering under existing state statutes, directly conflicting with the federal stance advocated by Underdog.
The conflict sits at the intersection of state gaming enforcement and federal commodity regulation. The Commodity Futures Trading Commission (CFTC) has continued to move forward with an interim rule and has issued a proposed classification for sports event contracts. However, state gaming regulators have taken a dim view of this CFTC-issued guidance, viewing it as an encroachment on their regulatory turf.
Supreme Court Defers as Litigation Continues
Most state regulators insist that the Supreme Court of the United States should intervene to resolve the jurisdictional conflict between state gaming boards and the CFTC. Despite this pressure, the Supreme Court has so far deferred intervention and is not actively looking into prediction market cases. This lack of definitive guidance from the nation’s highest court leaves lower federal courts and state legislatures to navigate the ambiguity, resulting in a patchwork of enforcement actions across different jurisdictions.
Attorneys general, gaming regulators, and private businesses are continuously litigating the issue, creating a landscape of ongoing legal battles. These disputes are often described as turf wars that hardly settle the broader conflict between state and federal authority over prediction markets. Outcomes in these cases tend to vary, with the winning party shifting based on specific legal arguments and court interpretations.
At best, these litigation outcomes buy a reprieve for the prevailing party rather than establishing a permanent legal framework. The filing in Tennessee marks the latest front in this ongoing regulatory dispute, as Underdog seeks to challenge the state’s authority to regulate its prediction market products under gaming statutes. The case will now proceed in the Middle District of Tennessee, where federal judges will weigh the arguments for federal preemption against state regulatory power.
Why It Matters
This lawsuit tests the boundary between state gaming commissions and federal commodity regulators, directly impacting how prediction market operators can function in the U.S. If Tennessee's approach is upheld, it could allow state gaming boards to restrict or ban prediction market products nationwide, altering the competitive landscape for both traditional sportsbooks and new prediction market entrants. The outcome will determine whether federal CFTC guidance or state gambling laws take precedence in regulating these financial instruments.
Sarah Thompson is an editorial byline used by Casino No Deposits for industry news coverage. Articles published under this byline are summarised from reporting by licensed gambling industry news sources and produced with AI assistance, then published against our editorial rules on accuracy, sourcing and tone. They are not first-hand reporting and do not contain personal player accounts. Our full process, including how bonus listings and ratings are maintained separately by our team, is documented in how we review casinos: https://casinonodeposits.com/how-we-review-casinos/
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