Underdog sues Connecticut over sports prediction-market orders

Underdog has sued Connecticut officials in federal court to stop the state from treating its sports-related event contracts as illegal gambling. The company is seeking declarations that its products are lawful and an injunction protecting its ability to operate in Connecticut.

According to The Block, Underdog contends that it operates a federally regulated designated contract market and that the Commodity Futures Trading Commission has “exclusive jurisdiction” over trading on such venues. It argues that Connecticut’s enforcement would be “meritless” and that the state order is additionally pre-empted because it conflicts directly with the Commodity Exchange Act framework.

The Connecticut filing follows Underdog’s Sept. 8 suits against Ohio, Massachusetts, Wisconsin, New Mexico and Washington, as we reported at the time. The new case takes the company’s challenge to state gambling enforcement into a sixth jurisdiction.

The action came after Connecticut’s Department of Consumer Protection issued cease-and-desist orders to nine prediction-market platforms last week, including Underdog, Polymarket, Coinbase, Crypto.com and Robinhood. The agency directed the platforms to immediately stop advertising, offering, promoting or otherwise making available sports-event contracts or other unlicensed online gambling to Connecticut residents.

The orders carry the prospect of civil penalties under the Connecticut Unfair Trade Practices Act and criminal penalties under state gaming laws for noncompliance. The department also issued nearly 30 subpoenas to gaming-service-provider licensees and Connecticut media outlets as part of its investigation.

Connecticut maintains that contracts linked to sporting outcomes are sports wagers when offered to residents without the licences required of betting operators. Bryan T. Cafferelli, the consumer-protection commissioner, said state law permits sports betting only through legal, licensed sportsbooks that comply with Connecticut regulations and technical standards.

The state said the platforms were operating in violation of its gaming and unfair-trade-practices laws. It also alleged that they accepted wagers from people prohibited from betting, including those under 21 and people on the state’s voluntary self-exclusion list, and offered wagers on Connecticut college sports, which state law prohibits.

Governor Ned Lamont said Connecticut’s 2021 legalisation of sports wagering was intended to create a regulated consumer market rather than a “free-for-all on sports betting.” State officials pointed to the scale of the sector, citing an American Gaming Association estimate that $40 billion will be wagered on the NFL through prediction markets in 2026 and nearly $250 million in college-football trading volume on the first day of the season at one platform.

Connecticut is among more than a dozen states that have brought enforcement actions or lawsuits over sports-event contracts. The state separately sued Kalshi in August to block its sports-related contracts, while the wider dispute has centred on whether federal oversight of designated contract markets displaces state gambling law.