Underdog has filed a federal lawsuit against Connecticut officials after the state ordered the company to stop offering sports-event contracts, escalating a fight over who has authority to regulate prediction markets. The company is one of nine firms hit with a cease-and-desist order from the Connecticut Department of Consumer Protection.
The DCP’s order also named Polymarket, Coinbase, Crypto.com, Robinhood, Prophet X, Novig, Webull, and Gemini, directing all nine to stop advertising sports-event contracts and to let Connecticut users withdraw existing funds. Underdog is asking a federal judge to draw a firm line around what the state can and cannot regulate.
What Underdog Wants From the Court
Underdog filed its 39-page complaint in the U.S. District Court for the District of Connecticut, naming the DCP and Attorney General William Tong as defendants. The company is asking the court to declare that Connecticut cannot apply its state gaming regulations to Underdog’s event contracts and to issue a permanent injunction blocking state officials from enforcing gaming law against the company’s prediction markets.
Underdog also wants the court to block further Connecticut efforts to regulate its prediction-market products, rather than limiting relief to the specific contracts named in the cease-and-desist order. The requested relief would extend beyond a challenge to a single enforcement action.
The Jurisdictional Fight Underneath It
Underdog’s core argument is that it operates federally regulated designated contract markets that list live-event contracts for trading, which it says places regulatory authority with the CFTC. In Underdog’s reading, that includes the CFTC’s authority to decide whether certain gaming-related event contracts should be prohibited as contrary to the public interest, a decision the company argues Connecticut cannot make independently.
Connecticut officials see it differently. State regulators contend the platforms bypass consumer protections by allowing bets from people under 21, wagers from individuals on self-exclusion lists, and contracts tied to in-state college teams. They say those activities violate Connecticut gaming law regardless of how the contracts are characterized under federal regulation.
Underdog is not alone in making the federal-preemption argument in Connecticut. The CFTC and companies including Robinhood have filed actions in federal court challenging the state’s enforcement push, arguing that federal oversight of designated contract markets overrides state gambling rules. Connecticut’s broader campaign against prediction markets has also touched its separate dispute with Kalshi over whether sports contracts require a state gambling license.
A Patchier Picture Elsewhere
The Connecticut fight is not happening in isolation. Montana recently paused enforcement against Kalshi, agreeing not to pursue enforcement, investigation, cease-and-desist proceedings, or other administrative action while the company seeks a rehearing before the Ninth Circuit. That followed a Ninth Circuit ruling that allowed Nevada to ban Kalshi and other prediction-market operators. The differing outcomes, detailed in ReadWrite’s coverage of the Missouri and Montana disputes, underscore how unsettled the legal terrain remains.
In Connecticut, the central issue is whether the federal court will accept Underdog’s argument that CFTC oversight of its designated contract markets forecloses state gaming enforcement, or whether Connecticut’s consumer-protection concerns support the state’s position. The case adds to the wider dispute over whether sports-event contracts should be regulated as federally overseen financial products or as sports betting under state gaming laws.
The post Underdog asks court to curb Connecticut’s prediction-market crackdown appeared first on ReadWrite.
This articles is written by : Nermeen Nabil Khear Abdelmalak
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