Underdog filed a lawsuit against Connecticut this week to overturn cease-and-desist orders the state issued to nine prediction market platforms, including Polymarket, Coinbase, and Crypto.com. The suit challenges the legal authority and constitutionality of the state's crackdown on sports prediction markets.
Connecticut's Department of Consumer Protection issued the cease-and-desist orders on September 10, claiming the platforms were offering illegal gambling products without state licensing. The action targeted Underdog, Polymarket, Coinbase, Crypto.com, Robinhood, ProphetX, Novig, Webull, and Gemini. Underdog filed its complaint days after, seeking declaratory judgment and an injunction to prevent enforcement of the orders.
Connecticut's Department of Consumer Protection has asserted jurisdiction over platforms offering binary options or yes-or-no contracts tied to sporting events, treating them as wagers subject to state gambling statutes. Prediction market platforms argue their products are derivatives or information markets, not bets, and in some cases operate under federal commodity regulation rather than state gaming law.
Underdog has operated as a sports prediction and pick-making platform, raising $50 million in a Series C round in 2024 according to prior reporting. Polymarket, the largest prediction market by trading volume, has faced regulatory pressure in multiple states. Coinbase holds a regulatory money transmitter license but does not hold a gaming license in Connecticut.
The cease-and-desist orders do not impose immediate fines but demand the platforms cease operations in the state within 30 days and return customer funds. Underdog's lawsuit asks a court to declare the orders unlawful and prevent Connecticut from enforcing them.
State attorneys general nationwide have begun targeting prediction markets over the past 18 months, claiming they operate as unlicensed sportsbooks. New York, Massachusetts, and other states have issued similar orders. The federal Commodity Futures Trading Commission has also issued guidance that certain prediction contracts may fall under its jurisdiction, creating overlapping claims of regulatory authority.
Underdog's challenge is the first judicial test of whether Connecticut can shut down a prediction market operator through the cease-and-desist mechanism. If the court rules the orders invalid, other platforms targeted by Connecticut may face the same vulnerability; if it upholds the state's authority, the decision could embolden other state regulators to pursue similar enforcement. The outcome will partly depend on whether the court views prediction markets as gambling products under state law or as derivatives outside that framework entirely.
