Is Underdog Predict legal in Tennessee?

We could not find the letter. Underdog attached it to its complaint as Exhibit 1, but the court-stamped copy we read, the only one we found, has 44 pages and no exhibit. Everything below about the letter is how Underdog's complaint describes and quotes it.

The complaint says the council's Director of Fantasy Sports, Nathan S. Shaver, signed the letter on October 9, 2026, with the council's executive director copied (p.3, ¶4; p.9, ¶21). In Underdog's account, the council "writes in light of the Sixth Circuit's recent decision," the September 25 ruling against Kalshi (p.30, ¶81).

The letter's core claim, as quoted, has three steps (p.30, ¶81). Underdog offers Tennessee customers "event contracts on the outcomes of sporting events." Those contracts "are 'wagers' under the Tennessee Sports Gaming Act." And "sports wagering may be offered in Tennessee only under a license issued by the SWC."

From there, the complaint says, the council "demands that Underdog cease offering Sports Event Contracts . . . to customers in Tennessee immediately" (p.30, ¶81). Underdog reads the letter as giving it "no option other than immediate withdrawal from Tennessee" (p.30, ¶82). That reading is Underdog's.

According to the complaint, the letter went to Underdog's chief executive (p.30, ¶81). It was addressed to three companies:

• Underdog Sports, LLC.
• UDM, LLC, which does business as Underdog Predict.
• Underdog Exchange DCM, Inc., under its former name, Aristotle Exchange DCM, Inc.

The complaint says the letter calls the exchange Underdog's "affiliated exchange."

Underdog Sports, LLC is the fantasy company. The complaint says it holds a Tennessee fantasy sports operator license from the council (p.11, ¶36). It calls those contests "distinct from the event contracts" Underdog lists on its exchange and offers through its broker arm. Underdog Sports is not a plaintiff.

The two plaintiffs say they started in Tennessee on the same day. The complaint says Underdog registered its futures commission merchant with the NFA and CFTC on January 9, 2026 and "began offering event contracts in Tennessee on August 28, 2026" (p.10, ¶32). The exchange began offering its own listings to traders in Tennessee that day too (p.11, ¶35). The CFTC designated it on September 5, 2025, as Aristotle Exchange; Underdog says it bought the company in March 2026, and the company filed a name change on August 31 (p.11, ¶33).

The complaint quotes the letter: "[i]f Underdog does not comply, the SWC will pursue the remedies available to it" (p.30, ¶82). Those include "fines of $10,000 to $25,000 per offense for unlawfully accepting wagers without a license, civil penalties, and injunctive relief through the Office of the Attorney General." It also quotes a warning of "referral of Underdog's illegal gambling operation to law enforcement for further investigation." The words "illegal gambling operation" are the council's, as Underdog quotes them.

The letter's last threat is the fantasy license. The complaint quotes it as warning that "[c]ontinuing to offer Sports Event Contracts will also put Underdog's fantasy sports operator license at risk of revocation" (pp.36-37, ¶93). Underdog says the state is using one license to punish conduct that federal law authorizes (p.37, ¶93).

The complaint lists the Tennessee penalties it says could follow (pp.37-38, ¶95):

• Council fines of $10,000, $15,000 and $25,000 for successive offenses.
• Attorney general civil penalties of up to $5,000 a violation and $50,000 a transaction or occurrence.
• Criminal charges for gambling promotion. We found no fine, license action or referral against any Underdog company. These are possibilities Underdog describes, not steps the state has taken.

Underdog Exchange DCM, Inc. and UDM, LLC filed on October 13, 2026 in the U.S. District Court for the Middle District of Tennessee, Nashville Division. The court's stamp gives the case number as 3:26-cv-01461 (p.1).

The complaint names eleven defendants, each in an official capacity (p.1; pp.9-10, ¶¶19-29). They are Attorney General Jonathan Skrmetti, the council's executive director Mary Beth Thomas, Mr. Shaver, the council's chairman William Orgel, and seven council members. The council itself is not a defendant. Underdog says it "sues only state officials" (p.8, ¶16). It cites the Sixth Circuit's September 25 opinion as allowing that kind of suit against Tennessee officials.

Which Tennessee laws does Underdog challenge?

The list covers the Sports Gaming Act, the Fantasy Sports Act, the criminal code's gambling sections and the council's rules, chapters 1350-01 to 1350-05 (p.40, ¶103). Including the fantasy law follows from the license threat. Underdog pleads three counts: express, field and conflict preemption (pp.39-42).

What relief does the complaint request?

The Prayer for Relief asks for two things (p.43). One is a declaration that those laws, "or any other state laws pertaining to gambling or wagering," are preempted as applied to Underdog's exchange and its trading on designated contract markets. The other is a permanent injunction barring the officials from enforcing them. The complaint itself does not ask for a temporary restraining order or a preliminary injunction. Underdog says it wants an order "that it can appeal" while the Supreme Court petitions are pending (p.4, ¶5).

We could not read the court's docket past the complaint. So we do not know which judge has the case or whether any date is set. We do not know whether Underdog has since asked for a restraining order or preliminary injunction, or whether the officials have answered. We found no order in the case.

Kalshi's case against the same state shapes this one. Underdog's complaint tells it this way (p.32, ¶85). The federal court in Nashville entered a restraining order and then a preliminary injunction for Kalshi. The Sixth Circuit vacated the injunction on September 25, 2026. Kalshi asked for rehearing on October 9. Where Kalshi's case stands now is in is Kalshi legal in Tennessee?, and the three Supreme Court petitions the complaint cites are followed in Realize’s Supreme Court tracker.

We read no filing by the state in Underdog's case. Its position here comes through the letter and what Underdog's complaint quotes. On April 14, 2025, the complaint says, the council's executive director told the CFTC the council "believe[s] that these sports event contracts are Wagers under the Act and are being offered in violation of Tennessee law and regulations" (p.31, ¶83). On January 9, 2026 the council sent Kalshi a cease-and-desist (pp.31-32, ¶84). It demanded that Kalshi stop, void pending Tennessee contracts and refund deposits to people in Tennessee.

The complaint describes the licensed market Tennessee runs instead (pp.28-29, ¶79). A license costs $750,000 to start. A licensee pays a privilege tax of 1.85% of its gross handle. Bettors must be 21 or older and physically in the state. Nine operators hold licenses. The 1.85% falls on a licensed operator, not on what a trader makes. Underdog says the license conditions would break the CFTC rule that an exchange give "impartial access" to all eligible participants (p.36, ¶92). Tennessee's stated view is that these contracts are wagers under its law; Underdog's is that the CFTC alone regulates them.

The council's sports wagering newsroom, read on November 1, 2026, lists no release about Underdog; its releases since August 2026 concern offshore sportsbooks.

We found no order that stops Underdog Predict in Tennessee, and no document that says whether it still offers sports event contracts there after the letter. Underdog's complaint says it began offering contracts in the state on August 28, 2026 (p.10, ¶32).

What about withdrawals and open positions?

No filing we read addresses withdrawals, deposits or open positions for Tennessee users. The letter to Kalshi, as the complaint describes it, demanded voids and refunds. Underdog's letter, in the complaint's account, demands that Underdog withdraw, and the complaint does not say it mentions accounts (p.38, ¶96). Underdog argues that a cutoff would let traders "open a position outside of Tennessee, travel to Tennessee, and, while there, lose the ability to close or expand" it (p.7, ¶11). That is Underdog's argument about a cutoff no court has ordered.

Underdog Predict is a futures commission merchant, and its Predict page, read on November 1, 2026, says its event contracts are offered by exchanges "including UDX, Kalshi, and Crypto.com | Derivatives North America." UDX is Underdog's own exchange. The page names no states.

As the complaint describes it, the letter points to contracts on Underdog's "affiliated exchange" (p.30, ¶81). We could not determine whether it also covers contracts Underdog Predict offers from other exchanges. Kalshi received its own Tennessee letter in January 2026, the complaint says (pp.31-32, ¶84).

Underdog's companies sued Massachusetts officials on September 8, 2026 (Underdog in Massachusetts). Missouri's attorney general sent a cease-and-desist letter to Underdog Sports Wagering, LLC dated September 17 (Underdog in Missouri). Connecticut's governor announced cease-and-desist orders on September 10 to nine prediction markets, Underdog Predict among them. Each state is on the Underdog legal page.

No: it is a regulator's demand about who may offer sports wagering in Tennessee, and the suit asks who regulates the contracts, so neither touches federal income tax. How people we've seen file report event contracts, with no IRS guidance on them, is in the prediction market tax guide and how to file Kalshi taxes.