Underdog sues Ohio, Massachusetts, and Wisconsin as prediction market fight deepens

Prediction market firm DCM, Inc. and Underdog Predict, operating as Underdog Exchange, have filed lawsuits against regulators in Ohio, Massachusetts, and Wisconsin, seeking to halt state application of gambling and sports betting laws to event contracts through their federally regulated market. The company is challenging the states' authority to regulate its prediction markets, arguing they fall under federal commodities law.

Ohio has already threatened Kalshi, a rival, with a $5 million penalty for alleged unlicensed sports gaming. Massachusetts and Wisconsin have also taken enforcement actions against Kalshi and other platforms, while the Commodity Futures Trading Commission has sued Wisconsin officials for interference with federal law. Underdog argues that compliance with state laws would leave it vulnerable to "potentially huge liability" while federal commodities law should preempt state restrictions.

The legal battle over prediction market regulation has become a growing divide between federal and state authorities, with the Ninth Circuit ruling that Kalshi's sports event contracts are sports bets, conflicting with the Third Circuit's approach favoring Kalshi.