Underdog has sued Connecticut officials in federal court, seeking to stop the state from treating its sports-related event contracts as illegal gambling, in a case that could define whether federally regulated prediction markets must also comply with state sportsbook licensing rules.
The lawsuit, filed on September 16, 2026, asks for declaratory and injunctive relief. Underdog argues that its prediction market operates as a federally regulated designated contract market, or DCM, and that the Commodity Futures Trading Commission has exclusive jurisdiction over trading conducted on those venues. The company contends Connecticut's order conflicts with the Commodity Exchange Act and is preempted by federal law.
The case follows cease-and-desist orders issued last week by the Connecticut Department of Consumer Protection to nine prediction-market platforms, including Underdog, Polymarket, Coinbase, Crypto.com and Robinhood. State officials maintain that sports betting may only be offered by licensed sportsbooks that comply with Connecticut regulations and technical standards. DCP Commissioner Bryan Cafferelli said: 'Our laws are clear: sports betting may only be offered by legal, licensed sportsbooks that adhere to our regulations and technical standards.'
The dispute is expanding beyond Connecticut. Earlier this month, Underdog filed federal lawsuits against officials in Ohio, Massachusetts, Wisconsin, New Mexico and Washington, seeking to protect its sports-event contracts from state enforcement. Connecticut itself is among more than a dozen states that have taken enforcement action or filed lawsuits against prediction-market platforms over sports contracts, and the state separately sued Kalshi last month.
The legal fight is unfolding during a major corporate transition. UK trading company IG Group agreed in July to acquire Underdog for up to approximately $1.3 billion, following Underdog's $70 million Series C financing at a $1.23 billion valuation in March 2025. A ruling in Connecticut and the other states could determine whether prediction market platforms can rely on federal derivatives regulation to offer sports-linked contracts nationwide or must navigate separate state gambling frameworks, a question central to the sector's future growth.
