Underdog Sues Tennessee in the Court Whose Kalshi Injunction the Sixth Circuit Threw Out

Underdog's exchange and brokerage arms filed a federal suit in Nashville on Tuesday against Tennessee's attorney general and the officials of its Sports Wagering Council, four days after a letter to "Mr. Levine". It is the seventh state Underdog has taken to court, and the first suit it has filed where a binding appeals ruling already rejects the argument it relies on.

• Underdog Exchange DCM, Inc. and UDM, LLC sued Tennessee Attorney General Jonathan Skrmetti, Sports Wagering Council executive director Mary Beth Thomas and nine individuals including the council's members in the US District Court for the Middle District of Tennessee on 13 October, case No. 3:26-cv-01461, according to the court docket
• The docket lists the cause of action as federal commodity exchange regulation; the complaint's only exhibit is a letter dated 9 October 2026 addressed to "Mr. Levine", the surname of Underdog's founder, Jeremy Levine, and neither the complaint nor the letter is public
• Tennessee is the seventh state Underdog has sued, after Ohio, Massachusetts, Wisconsin, New Mexico and Washington on 8 September and Connecticut on 15 September, each time arguing that federal commodities law preempts state gambling law
• The same court granted Kalshi a preliminary injunction against Tennessee's regulators in February, which the Sixth Circuit vacated on 25 September, holding that Kalshi was unlikely to succeed on the same preemption argument
• No motion for a restraining order or preliminary injunction appeared on the docket by 14 October, and the court has set an initial case management conference for 28 January 2027

Underdog Takes Its Preemption Case to the Sixth Circuit's Own Ground

Underdog Exchange DCM, Inc., the designated contract market (DCM) Underdog bought in March, and UDM, LLC, the arm that trades as Underdog Predict, filed their complaint in Nashville on Tuesday 13 October, according to the docket on CourtListener. The defendants are Attorney General Jonathan Skrmetti, Mary Beth Thomas, the council's executive director, and nine individuals: William Orgel, Kevin Carroll, Samuel K. Lee, Brian E. Fazenbaker, Kandace C. Stewart, Tom Flynn, Hanes L. Torbett, Michael E. Keeney and Nathan S. Shaver. The first eight are listed as the council's members on its website. The case is assigned to Chief Judge William L. Campbell Jr. and Magistrate Judge Lynda M. Hill, and Underdog is represented by Thomas H. Lee of FBT Gibbons in Nashville.

The docket describes the case as one of "Federal Commodity Exchange Regulation". The complaint itself had not been placed in the free RECAP archive by Thursday morning, so its exact claims cannot yet be read. Its single exhibit is described as a "Letter dated October 9, 2026 to Mr. Levine". The docket does not say who sent it or what it demands, and iGaming Times found no announcement of it on the council's newsroom, whose latest item, on 7 October, concerned cease-and-desist demands to two offshore sportsbooks.

Underdog's earlier complaints show the likely shape. The Ohio complaint, filed on 8 September by the same two plaintiffs, argues that the Commodity Exchange Act gives the Commodity Futures Trading Commission (CFTC) "exclusive jurisdiction" over trading on DCMs, and pleads three counts of express, field and conflict preemption under the Supremacy Clause. It asks for a declaration that state gambling laws, as applied to Underdog's exchange and its trading on other DCMs, are preempted, and for a permanent injunction barring officials from enforcing them. "Any enforcement action by Ohio would be meritless," it says.

Tennessee Has Already Won This Argument Once

Tennessee's Sports Wagering Council regulates both sportsbooks and fantasy sports. In January it sent cease-and-desist letters over sports event contracts to Kalshi, Polymarket and Crypto.com. Kalshi sued, and in February Judge Aleta Trauger, of the same Nashville court, granted it a preliminary injunction against the council's officials and Skrmetti, finding the contracts were swaps and Tennessee law conflict-preempted.

On 25 September the Sixth Circuit vacated that injunction in a unanimous published opinion, holding that Kalshi's sports contracts are not swaps and that, even if they were, the Commodity Exchange Act would not preempt Tennessee's or Ohio's gambling laws. Skrmetti said the ruling lifted the order that had blocked enforcement against Kalshi. Ohio's regulator followed with cease-and-desist letters to ten platforms on 2 October, two of them Underdog entities, with a 14-day deadline that falls on Friday.

Underdog also holds a Tennessee fantasy sports licence: Underdog Sports, LLC is on the council's list of approved fantasy sports licensees. Tennessee was not among the seven states where the company gave up its fantasy licences in September after regulators told it the two products could not coexist. Neither Underdog nor the council had commented publicly on the suit by Thursday morning.

Underdog Has Sued Into the Strongest Headwind Available

The Middle District of Tennessee is bound by the Sixth Circuit's published opinion, and that opinion was decided on an appeal from this court, against these officials, on this argument. Underdog's Ohio complaint, filed before the ruling, cited Kalshi's Tennessee injunction among the authorities supporting preemption; that injunction no longer exists. A district judge in Nashville cannot adopt the Third Circuit's view over the Sixth's. What Underdog can do is preserve its position, put the state's letter before a federal court rather than wait for an administrative or criminal proceeding, and be ready if the Supreme Court takes the question.

The Missing Motion Is the Telling Detail

Kalshi sued Tennessee on 9 January, the date of the council's letters, and its motion for a preliminary injunction is the sixth entry on that docket. Underdog's docket shows a complaint, disclosure statements and summonses, but no motion for a restraining order or preliminary injunction by 14 October, and a first case management conference more than three months away. That is consistent with a plaintiff that knows an injunction is unlikely in this circuit and is filing to establish a record, not to win this autumn. If the 9 October letter sets a compliance deadline, Underdog will have to decide, as it did in seven states in September, which product it is prepared to keep in Tennessee.

The Fantasy Licence Is Tennessee's Lever

Tennessee's regulator holds something Kalshi never gave it: a licence Underdog wants to keep. Seven states have already shown that a fantasy licence can be made conditional on not offering event contracts, without winning anything in court. Whether the council has made that link here is not known while the letter is not public. For IG Group, which agreed to buy Underdog for up to about $1.3 billion and sets out its strategy on 22 October, each state that forces the choice narrows the national footprint the deal was priced on.

Underdog has now sued seven states in just over five weeks, and this is the first where the law of the circuit is already against it. The suit buys time and a forum; it is unlikely, on its own, to buy a Tennessee market.