Underdog Files Five Lawsuits Over State Gambling Laws

Underdog, operating under the Underdog Predict name, has filed five federal lawsuits against officials in Massachusetts, New Mexico, Ohio, Washington and Wisconsin. The cases were submitted on September 8.

The lawsuits seek declaratory relief and permanent injunctions that would prevent the enforcement of state gambling laws in those jurisdictions in relation to Underdog’s sports event contracts.

By naming prediction-market and exchange entities in the cases, Underdog is seeking to establish that its sports event contracts are governed by federal derivatives law and therefore cannot be subject to continued enforcement under state gambling legislation.

The filings add to the growing dispute between prediction-market companies and state gambling regulators over the treatment of sports event contracts.

Three days before the lawsuits were filed, Jeremy Levine, CEO and co-founder of Underdog, announced that the company would discontinue its Drafts product in Massachusetts, Maryland, Michigan, Mississippi, New Jersey, Pennsylvania and Ohio.

The states named in the lawsuits and those affected by the Drafts withdrawal overlap in only two cases: Massachusetts and Ohio. The decision to withdraw Drafts therefore covers a broader group of jurisdictions than those targeted by the federal lawsuits.

Underdog is now taking two approaches at the same time: reducing its Drafts operations across seven states while seeking protection through five federal courts against state-level gambling enforcement affecting its prediction-market business.