Underdog Sues Connecticut Over Sports Event-Contract Crackdown

Underdog’s prediction-market businesses sued three Connecticut officials in federal court on September 15, 2026, seeking to block the state from treating sports-related event contracts listed on federally regulated markets as illegal gambling. The complaint, filed in the U.S. District Court for the District of Connecticut six days after state regulators ordered Underdog Predict to stop offering the contracts to Connecticut residents, requests declaratory and injunctive relief that would allow the company to continue operating in the state.

What Underdog’s lawsuit asks the court to do

Underdog Exchange DCM, Inc. and UDM, LLC, doing business as Underdog Predict, filed the complaint as Case No. 3:26-cv-01499, with Skadden, Arps, Slate, Meagher & Flom LLP as counsel. The defendants are Attorney General William Tong, Department of Consumer Protection Commissioner Bryan T. Cafferelli, and DCP Gaming Director Kristofer Gilman, each sued in an official capacity.

The suit asks the court to declare that Connecticut’s gambling and wagering statutes, as applied to Underdog’s designated contract market and its transactions on such markets, are preempted and unconstitutional under the Supremacy Clause, and to permanently enjoin the officials from enforcing those laws against it. The complaint brings three preemption counts: express preemption, field preemption, and conflict preemption.

Underdog alleges it faces a “real and imminent risk of enforcement,” pointing to the cease-and-desist order against it and the state’s August 26 lawsuit against Kalshi. The company says it confronts a “Hobson’s choice” between complying with a law it considers preempted and continuing to operate while exposed to civil penalties, potential criminal liability, and forced cessation of its Connecticut operations — harm it calls irreparable.

The cease-and-desist letter and a nine-platform sweep

In a September 9 letter, which Underdog filed as an exhibit to its complaint, DCP Gaming Director Kristofer Gilman told UDM that it was conducting unlicensed online gambling — specifically sports wagering — through its sports event contracts, in violation of Conn. Gen. Stat. §§ 53-278b and 53-278d and the Connecticut Unfair Trade Practices Act. The letter ordered UDM to immediately cease and desist advertising and offering the contracts within Connecticut, while requiring it to allow Connecticut residents to withdraw any funds held. It warns that failure to comply may bring additional action, including civil penalties under CUTPA and/or criminal penalties under the state’s gaming statutes.

The letter lays out the state’s theory: that the contracts constitute sports wagering under Conn. Gen. Stat. § 12-850(34), that they are void wagering contracts under § 52-553, and that they would violate Connecticut law even with a gaming license because UDM allegedly accepts wagers from people under 21 and offers wagers on Connecticut intercollegiate teams. A footnote cites Judge Vernon Oliver’s decision in KalshiEX LLC v. Cafferelli, quoting the conclusion that the contracts are “at bottom” sports wagers.

On September 10, Governor Ned Lamont and Commissioner Cafferelli announced that DCP had issued nine cease-and-desist orders to prediction-market platforms — Polymarket, Coinbase, Crypto.com, Robinhood, ProphetX, Novig, Webull, Gemini and Underdog Predict — along with nearly 30 subpoenas to gaming service provider licensees and Connecticut media outlets, whose recipients the state said are not themselves under investigation. Subpoenas also went to app stores and payment companies, including the Apple App Store, Google Play, Apple Pay, Google Wallet and Stripe. All nine platforms were ordered to immediately stop advertising, offering, promoting or otherwise making available “sports event contracts” or any other form of unlicensed online gambling to Connecticut residents, with noncompliance potentially bringing CUTPA civil penalties and/or criminal penalties under gaming statutes.

Underdog’s federal preemption argument

Underdog argues that it operates a CFTC-designated contract market listing event contracts and is also a federally registered futures commission merchant, and that the Commodity Exchange Act vests the CFTC with sole regulatory authority over event contracts traded on DCMs — including deciding whether gaming-related contracts are contrary to the public interest under 7 U.S.C. § 7a-2(c)(5)(C). The company contends event contracts are “swaps” under the CEA’s definition in 7 U.S.C. § 1a(47), placing them within the commission’s exclusive jurisdiction.

The complaint recites a rapid regulatory build-out: Underdog’s FCM registered with the NFA and CFTC on January 9, 2026 and began offering event contracts in Connecticut on April 23, 2026; Underdog acquired Aristotle Exchange DCM, Inc. in March 2026, announced its DCM launch on July 18, 2026, and renamed the entity Underdog Exchange DCM, Inc. on August 31, 2026. It says it began offering its DCM listings to Connecticut traders on July 17, 2026 and obtained CFTC certification for hundreds of event contracts between July 12 and September 2, 2026. The CFTC’s own filing record shows Aristotle Exchange DCM, Inc. was designated as a DCM on September 5, 2025, matching the designation Underdog says it acquired.

Underdog also notes that the CFTC itself sued Connecticut, Cafferelli and Tong in the same court on April 2, 2026 (No. 3:26-cv-00498), arguing that state enforcement against CFTC-regulated markets violates the Supremacy Clause. The attorney general’s office has acknowledged that suit and said Connecticut has moved to dismiss it.

Connecticut’s position and the Kalshi litigation backdrop

The state maintains that prediction markets offering sports wagers operate in violation of Connecticut gaming and unfair trade practices laws, alleging they accept wagers from prohibited bettors — including people under the legal betting age of 21 and those on the state’s voluntary self-exclusion list — and offer wagers on Connecticut collegiate sports, which state law expressly prohibits. “Our laws are clear: sports betting may only be offered by legal, licensed sportsbooks that adhere to our regulations and technical standards,” Cafferelli said. In Connecticut, the three licensed platforms are DraftKings (Foxwoods), FanDuel (Mohegan Sun) and Fanatics (Connecticut Lottery), and participants must be at least 21.

The Underdog dispute follows the state’s running fight with Kalshi. On December 2, 2025, DCP ordered KalshiEX LLC to cease and desist offering its sports event contracts in Connecticut on the same statutory theory later applied to Underdog. Kalshi responded by suing the state; in August, Judge Oliver denied Kalshi’s motion for a preliminary injunction, and Kalshi has appealed to the Second Circuit. On August 26, 2026, the state sued Kalshi, seeking an injunction to block it from offering what officials call unlicensed sports wagers in Connecticut. Announcing that suit, Tong said “sports event contracts are no different than sports betting and are not magically shielded by federal law.” The governor’s office has characterized the August federal ruling as holding that sports event contracts are illegal unlicensed gambling not protected by federal commodities law.