Underdog has filed a lawsuit against Connecticut officials in federal court, aiming to prevent the state from categorizing its sports-related prediction-market contracts as illegal gambling, The Block reported.
Underdog is seeking declaratory and injunctive relief to continue its operations in Connecticut, claiming that it operates as a federally regulated designated contract market (DCM) and that the Commodity Futures Trading Commission (CFTC) holds “exclusive jurisdiction” over trading on DCMs.
The company argues that Connecticut’s enforcement action is “unfounded” and “preempted” as it clashes with the federal framework established under the Commodity Exchange Act.
The lawsuit follows cease-and-desist orders issued by the Connecticut Department of Consumer Protection (DCP) to nine prediction-market platforms, including Underdog, Polymarket, Coinbase, Crypto.com, Robinhood, ProphetX, Novig, Webull, and Gemini.
The state instructed the companies to halt advertising, promoting, or offering sports event contracts to Connecticut residents and give customers access to withdraw their funds.
DCP Commissioner Bryan Cafferelli said: “Our laws are clear: sports betting may only be provided by legal, licensed sportsbooks that comply with our regulations and technical standards.”
Connecticut officials argue that sports event contracts function as sports wagers and should only be offered through licensed sportsbooks under state gambling regulations. Governor Ned Lamont has also stated that prediction markets were operating outside the state’s consumer protection framework.
Connecticut regulators have raised concerns about age restrictions, self-excluded individuals, and contracts linked to college sports events. The state has also issued nearly 30 subpoenas to payment processors, technology providers, media organizations, and other entities as part of its investigation.
The lawsuit is the latest development in a broader legal dispute over whether sports event contracts should be regulated as financial instruments under federal law or treated as sports betting under state gambling laws.
Earlier this month, Underdog sued Ohio, Massachusetts, Wisconsin, New Mexico, and Washington over similar state enforcement efforts. Connecticut also sued Kalshi last month, seeking to prohibit the prediction-market operator from offering sports event contracts in the state.
IG Group announced in July its acquisition of Underdog for up to $1.3 billion. The company secured $70 million in Series C funding in March 2025 at a $1.23 billion valuation.