Fight or Flight? Underdog Sues In Missouri While 5 Prediction Markets Exit Ohio
Image: Chris Sabor/Unsplash
Prediction market operators are facing two distinct options: sue or surrender. In response to cease-and-desist letters, several platforms are exiting Ohio, but others are filing lawsuits. Underdog is choosing the latter path in Missouri.
The lawsuit asks the court to issue a preliminary injunction to prevent Missouri officials “from enforcing Missouri’s preempted gambling statutes against Underdog’s federally regulated derivatives markets.”
Underdog All In On Prediction Markets
Underdog launched its prediction market platform in July. It initially launched in 38 states, but has since expanded into 46. It does not offer the product in Arizona, New York, Nevada, or Michigan.
The company gave up DFS licenses in seven states to focus on prediction markets and is taking an aggressive approach to defend its new business model.
“We continue to build and support it, but it just doesn’t monetize anywhere near some of our other products, like prediction markets,” CEO Jeremy Levine said on giving up the DFS licenses.
“Sometimes, and I know people hate to hear this, you’ve got to make decisions with dollars and cents. If we had both on at the same time, we would have made 40x more on prediction markets than on Drafts in September,” he added in an interview with RotoWire.
Missouri is the eighth state Underdog has sued, following similar actions in Connecticut, Massachusetts, New Mexico, Ohio, Tennessee, Washington and Wisconsin.
Five Companies Exit Ohio, Polymarket and Kalshi Refuse
In Ohio, other companies are going another route and exiting the state. The Ohio Casino Control Commission (OCCC) sent cease-and-desist letters to 10 companies earlier this month:
- Underdog
- Gemini
- Polymarket
- Webull
- Plus500
- Coinbase
- ProphetX
- Novig
- Robinhood
- Moomoo
Of these, the OCCC confirmed that Robinhood, Gemini, Plus500US, and Moomoo Financial have already stopped offering sports markets to Ohio users. Coinbase has agreed to restrict its markets by November 13.
Novig, ProphetX and Webull remain in discussions with the commission, according to the OCCC. ProphetX and Webull have both exited Connecticut and may be expected to take similar action in Ohio.
Polymarket, meanwhile, has taken a similar stance to Underdog and filed a lawsuit against the OCCC.
Kalshi has also refused to exit the state, instead fighting the OCCC in court. It filed a lawsuit in October last year, but a judge denied its motion for a preliminary injunction. It appealed to the Sixth Circuit, which upheld the ruling.
The company then petitioned for a rehearing en banc, which remains pending. The Ninth Circuit denied its en banc hearing request in Nevada last week and we may expect a similar result in Ohio.
Operators Sue Missouri
Underdog’s lawsuit in Missouri comes after Attorney General Catherine Hanaway sent a cease-and-desist letter to the company in September. As well as Underdog, Hanaway also sent the letters to Kalshi, Polymarket, Crypto.com, Novig, and Robinhood.
“Missourians voted for a safe, well‑regulated sports wagering market that supports public education and addresses problem gambling.
“Companies cannot repackage sports bets as ‘event contracts’ to avoid Missouri law. We will enforce the rules voters approved and protect consumers,” said Hanaway in a press release.
“Any company that wants to offer sports wagering in Missouri must be licensed by the Missouri Gaming Commission, pay the required taxes and fees, and ensure no one under 21 can place a bet.”
Crypto.com, Kalshi, and Novig all responded by filing a lawsuit against Hanaway and the Gaming Commission.
Kalshi argued that Missouri’s licensing requirements offer no realistic path to compliance. The state launched online sports betting in December last year, awarding two independent licenses to DraftKings and Circa Sports. Other licenses require partnerships with casinos or professional sports teams.
Underdog Ready To Switch Model If Necessary
Underdog announced a deal with the Kansas City Royals last year to submit its license application, but withdrew shortly to focus on prediction markets.
“We want to offer our customers the best experience we can, to the most customers, in any format we think is legal and ethical,” said Levine. “We think sports event contracts are swaps, and they’re to be regulated federally by the CFTC.”
Courts have generally disagreed, but while the litigation is ongoing the company can continue offering what Levine says is a more profitable product. He said the company is ready to turn off states if necessary and switch back to its DFS product.
“In the way we built our product, the back end is where we handle the regulatory architecture, and the front end is supposed to be seamless for the customer,” he said. “If things change, we could turn off a state, turn off prediction markets in a state and have it just be fantasy, or vice versa, in real time. We’re built for it.”
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