WagerMintsIs Underdog legal? State by state
Last reviewed Oct 27, 2026
5 states
Where does Underdog stand?
Underdog received a September 2026 order and sued the state on September 15, 2026.
Underdog's exchange sued the attorney general in federal court in September 2026.
Underdog Exchange DCM sued Ohio officials in federal court in Cleveland on Sept. 8, 2026 and asked for a preliminary injunction on Oct. 16, 2026; no ruling yet.
Underdog Exchange DCM sued Tennessee officials in federal court in Nashville on Oct. 13, 2026; no ruling yet.
Underdog Exchange DCM sued the attorney general on Sept. 8, 2026.
Federal courts
What have the federal courts said?
States say prediction market sports contracts are bets that their gambling laws cover, while Kalshi and the CFTC say they are swaps, a kind of derivative that only the federal Commodity Exchange Act and the CFTC regulate. The Third Circuit appeals court sided with Kalshi against New Jersey in April 2026, while the Ninth Circuit (Nevada, August 2026) and the Sixth Circuit (Ohio and Tennessee, September 2026) ruled for the states, all at the preliminary stage. The Fourth Circuit (Maryland) heard argument in May 2026 and had not ruled as of November 3. New Jersey's petition to the Supreme Court, Flaherty v. KalshiEX (No. 26-299), is waiting on Kalshi's response due December 7, 2026, and the Court has not yet said whether it will hear the case. On October 9, 2026 the CFTC proposed a rule defining event contracts as swaps.
Your taxes
How are Underdog trades taxed?
Is Underdog legal in the US?
Underdog's position differs by state, and courts have split on whether states can apply gambling laws to these contracts. The states below have an order, lawsuit, letter or law on record that names Underdog.
Do I owe tax on Underdog profit if my state is fighting it?
Yes. Federal tax still applies, and IRS Publication 525 says income from illegal activities must be reported too. A state's legal fight doesn't remove tax on profit you already made.