Underdog sues Tennessee after a cease-and-desist, as Kalshi asks the Sixth Circuit to rehear its case
Tennessee’s Sports Wagering Council told Underdog on 9 October to stop offering sports event contracts or face fines and the loss of its fantasy licence. Underdog sued on 13 October. The same day the letter went out, Kalshi asked the full Sixth Circuit to rehear the ruling that let Tennessee and Ohio enforce their gambling laws.
Tennessee is using its Sixth Circuit win to go after more prediction markets. On 9 October 2026 the Tennessee Sports Wagering Council sent Underdog a cease-and-desist letter over its sports event contracts. Underdog sued the state in federal court in Nashville on 13 October. On the same day the letter was sent, Kalshi asked the full Sixth Circuit to rehear the decision that cleared the way for Tennessee's enforcement.
The letter
- Stop offering sports event contracts to Tennessee customers.
- Fines of $10,000 to $25,000 per offence, possible civil penalties and a referral to law enforcement.
- A warning that the fantasy sports licence held by Underdog's affiliate is "at risk of revocation": the state's main lever, since Underdog's fantasy business depends on it.
The lawsuit
Underdog sued Attorney General Jonathan Skrmetti and council officials. It argues that the Commodity Exchange Act gives the CFTC exclusive authority over its federally regulated exchange, and that the Constitution's Supremacy Clause stops Tennessee applying gambling law to it. It asks for a declaratory judgment, a temporary injunction while the case runs, and a permanent injunction. Tennessee is the seventh state Underdog has sued over its contracts.
Underdog's complaint acknowledges the obstacle: the Sixth Circuit, whose decisions bind federal courts in Tennessee, has already ruled against Kalshi on the same question. It says it is suing partly to preserve its rights while the issue goes to the Supreme Court.
Kalshi's rehearing request
On 9 October Kalshi filed a petition for rehearing en banc, asking all the Sixth Circuit's active judges to reconsider the panel's 25 September ruling that sports contracts are not swaps and that, even if they were, federal law does not stop states regulating them (Ohio's deadline). Such petitions are rarely granted, but filing one keeps options open while New Jersey's petition sits at the Supreme Court (NFL brief).
What it means for users
Availability in Tennessee and Ohio could narrow further if the platforms are forced to geofence sports contracts. Underdog's prediction product and its history: Underdog Predictions. Where Kalshi stands state by state: is Kalshi legal?.
