The latest prediction market developments all point to the same fight: whether sports event contracts are federally regulated derivatives or state-regulated gambling. In the past week, Underdog sued Connecticut officials in federal court, Montana agreed to pause enforcement against Kalshi while the Ninth Circuit considers a rehearing, and sports data suppliers have started positioning themselves for the event trading business. None of it is settled, and that uncertainty is the story.
What happened
Three threads moved at once, and they are all versions of the same jurisdictional argument.
Underdog takes Connecticut to federal court
Underdog filed a federal lawsuit against Connecticut officials after the state’s Department of Consumer Protection (DCP) issued cease-and-desist orders to nine companies offering sports-related event contracts. The DCP’s list covers Underdog, Polymarket, Coinbase, Crypto.com, Robinhood, Prophet X, Novig, Webull and Gemini. The orders require those platforms to stop offering and advertising sports event contracts in the state and to let Connecticut users withdraw their existing funds.
Underdog’s 39-page complaint, filed in the U.S. District Court for the District of Connecticut, asks the court to stop the DCP and Attorney General William Tong from applying state gaming law to its event contracts. It seeks a declaratory judgment that Connecticut cannot regulate those contracts and a permanent injunction against state enforcement. The company’s core argument: it lists live event contracts on federally regulated designated contract markets (DCMs), and the Commodity Futures Trading Commission has sole authority over event contracts and other derivatives traded on a DCM, including any decision to prohibit gaming-related contracts as contrary to the public interest.
Connecticut’s position is about consumer protection rather than product taxonomy. State officials say these markets sidestep rules that licensed operators must follow, because they can accept activity from people under 21, from people on the state’s self-exclusion list, and on in-state college teams. All three are restricted or banned under Connecticut’s gaming framework.
Underdog is not alone in court. The CFTC itself and Robinhood have also filed federal actions aimed at blocking Connecticut’s enforcement, arguing that federal oversight preempts state gambling law.
Montana pauses enforcement against Kalshi
Kalshi dropped its Montana lawsuit after the state agreed not to enforce its gambling laws against the company while Kalshi seeks a rehearing before the U.S. Court of Appeals for the Ninth Circuit. Under a five-page joint stipulation, Montana will not pursue enforcement, investigations, cease-and-desist proceedings or other administrative action until the court denies further review or issues an en banc decision. If Montana decides to act after that, it has to give Kalshi 30 days’ written notice first.
That is a truce, not a ruling. It keeps Kalshi trading in Montana while the appellate question stays open, and it tells you how much weight both sides are putting on what the Ninth Circuit does next.
Suppliers start circling
The third signal is commercial rather than legal: sports data and technology suppliers, Genius Sports among them, are moving toward the event trading space. That matters because prediction markets on sports need exactly what sportsbooks need, which is licensed, low-latency official data and settlement feeds tied to the NFL, NBA, MLB and NHL. When the supply chain starts building for a product category, it usually means the companies inside it expect the category to survive.
Why it matters
Strip away the filings and this is a fight over which rulebook applies to a bet on a football game when it is structured as a contract that trades between two people instead of a wager taken by a house.
The mechanics genuinely are different, and that difference is why the argument has legs.
| Feature | Event contract on a DCM | Licensed sportsbook |
|---|---|---|
| Regulator claimed | CFTC (federal, derivatives) | State gaming regulator |
| Who you trade against | Other participants, via an order book | The operator (the house) |
| How prices form | Order flow; price implies probability | Operator sets odds with a built-in margin |
| Platform revenue | Trading fees and spread | The overround / house edge |
| Age and exclusion rules | Financial-market onboarding standards | 21+ (in most US states), self-exclusion lists, college-team restrictions |
Note the honest part: an exchange model removes the house’s fixed margin, but it does not remove cost. Fees and the bid-ask spread still make the average participant’s expected return negative over time, and the smarter money on the other side of your trade is not a consumer protection. “No house edge” is not the same as “favourable odds.”
For the wider gambling industry, three consequences follow. Licensed operators pay state taxes and carry compliance costs that event trading platforms currently argue they are exempt from, which is a competitive gap, not a rounding error. Regulators see a channel where their age limits and self-exclusion tools do not reach, which is the specific objection Connecticut is making. And if federal preemption holds up on appeal, sports event contracts effectively become a nationwide product in the US, including in states with no legal sportsbook at all. If it does not hold up, the same platforms face a state-by-state licensing grind.
What it means for IN readers
For readers in India, none of this changes your legal position, but it does explain what you are looking at when an app calls itself an “opinion trading” or “event trading” platform rather than a betting site.
The American argument works because the CFTC exists: there is a federal derivatives regulator, a formal designated contract market status, and a statutory hook for event contracts. India has no equivalent pathway for retail event trading on sports or news outcomes. Indian regulators have moved in the other direction. The Promotion and Regulation of Online Gaming Act, 2025 prohibits online money gaming services, and legal challenges to that framework have been before the courts, so the position is still being worked out. Treat any platform’s claim that it is a “skill-based trading exchange” and therefore outside gambling rules as a claim, not a finding. Publishers should verify the current status of the Act and pending litigation before relying on it. (Editor: attach the gazette notification and latest court order here.)
A few practical points that actually apply to an Indian reader:
- The label is not the protection. An order book does not give you deposit safeguards, dispute resolution or a self-exclusion tool. Ask who holds your money and who you complain to if a settlement looks wrong.
- Geo-restrictions are real. US-regulated platforms such as Kalshi onboard under financial-market rules and restrict who can trade. Routing around a restriction usually ends with a failed KYC check and a frozen balance.
- Tax does not care what you call it. Winnings from online games in India attract TDS on net winnings under the Income Tax Act, and GST applies to the sector. Rates change, so confirm current figures with a qualified professional. This is information, not tax advice.
- The pricing logic is worth learning anyway. A contract trading at ₹60 out of ₹100 is quoting roughly a 60% implied probability, the same maths as decimal odds of about 1.67. Understanding implied probability and margin makes you a better reader of any price, sportsbook or exchange.
Key takeaways
- Underdog sued Connecticut in federal court after the DCP ordered nine platforms, including Polymarket, Robinhood and Coinbase, to stop sports event contracts in the state.
- Underdog’s case rests on CFTC exclusivity over event contracts listed on designated contract markets; the CFTC and Robinhood have filed their own actions against Connecticut’s enforcement.
- Connecticut’s objection is practical: under-21 access, self-excluded players and in-state college markets, all restricted for licensed operators.
- Montana agreed not to enforce against Kalshi pending Ninth Circuit review, with 30 days’ notice required before any future action. Kalshi withdrew its state lawsuit as part of that stipulation.
- Supplier interest, including Genius Sports, suggests the industry expects sports event trading to stick around regardless of individual state fights.
- India has no CFTC-style route for retail event contracts, and the 2025 online gaming law restricts online money gaming, so “prediction market” branding carries no special legal status here.
- Exchange pricing removes the bookmaker’s fixed margin but not your costs. Fees, spread and better-informed counterparties still make it a losing proposition on average.
What to watch next: the Ninth Circuit’s decision on rehearing in the Kalshi matter, and whether the Connecticut federal court accepts the preemption argument. Either outcome sets the template other states follow.
If you do trade or bet anywhere, set a deposit limit before you start, use cool-off and self-exclusion tools where they exist, and treat the money as spending, not income. Free, confidential support is available through national helplines in most jurisdictions. Anyone under the legal age should not be gambling or trading event contracts at all.
For the underlying federal framework on event contracts and designated contract markets, the CFTC publishes its rules and enforcement actions at cftc.gov.