Underdog sues Tennessee officials in federal court over sports event contracts

Underdog has taken Tennessee officials to federal court. The complaint was filed on 13 October in the Middle District of Tennessee.

The case tests whether a state can use its fantasy licensing powers against exchange-traded contracts that the company says only federal regulators can oversee.

What happened

According to the court docket, Underdog Exchange DCM, Inc. and UDM, LLC filed the complaint on 13 October against eleven defendants, including Jonathan Skrmetti. The case is numbered 3:26-cv-01461. On 14 October, Chief Judge William L. Campbell Jr. referred it to the Magistrate Judge for case management. An initial conference by telephone is scheduled for 28 January 2027.

As SBC Americas reported, Underdog states that Underdog Sports is a separate affiliate whose fantasy contests are distinct from the exchange and brokerage businesses.

The complaint points to a CFTC proposed rule and a CFTC interim final rule.

The complaint also cites the Sixth Circuit decision and links the lawsuit to the prospect of further appellate review.

Underdog has sued seven states to date, according to SBC Americas.

Why it matters

Operators that run both fantasy and event-contract products under one corporate group will need to check whether a state regulator could link the two licences. Affiliates and media buyers promoting event-contract products in US states should confirm which state notices are in force before they change campaigns.

The case could show whether courts accept a separation between a fantasy sports licence and an exchange affiliate when a state objects to the exchange's contracts. A ruling on that point is likely to affect how other state regulators approach licence holders with event-contract businesses.

The NFL has urged the justices to hear New Jersey's case, joining a push for review supported by attorneys general from 39 states and the District of Columbia.

Suppliers and payment providers that serve event-contract platforms could also need to review how their agreements describe the business lines they support, since Underdog says its fantasy contests are separate from its exchange and brokerage operations. Compliance teams at operators may want to track the filings, because the complaint relies on federal rule-making and the Sixth Circuit decision, and a shift in either could change how state licensing powers are applied. Until a court rules, affiliates are likely to face uncertainty over which product lines can safely be promoted.

What's next

The initial case management conference is set for 28 January 2027 before Magistrate Judge Hill. The case is to be set for trial by order of the District Court once that conference is completed.