One question, asked badly, in court after court
A fantasy contest is a paid-entry competition where you build a roster and your result depends on real athletes’ statistics. That is where the agreement ends. Fantasy sports legal disputes recur because jurisdictions disagree on whether such contests are skill competitions or wagers, and the answer decides whether an operator needs a gambling licence, a different licence, or is simply banned. Underdog’s new injunction fight against the state of Tennessee is the latest version of it.
Here is the complication. Most Indian readers already know the popular answer: fantasy sports is a game of skill, so it is legal. That conclusion has held up in Indian courts for years. But the reasoning behind it is weaker than players assume, and the Underdog case shows why. The skill-versus-chance test is only one of several tests an operator can lose, and losing any of the others shuts the contests down just as effectively.
What Underdog is actually asking a Tennessee court to do
Underdog sued the state of Tennessee in federal court after receiving a cease-and-desist letter over its event-contract exchange, and has asked a judge to block enforcement of state wagering laws against the platform. The filing was made in the U.S. District Court for the Middle District of Tennessee, Nashville Division, and seeks a declaratory judgment plus a permanent injunction.
The plaintiffs are Underdog Exchange DCM Inc. and UDM LLC, which does business as Underdog Predict. The defendants include Tennessee Attorney General Jonathan Skrmetti and the Tennessee Sports Wagering Council. Underdog’s position is that federal oversight governs its exchange; Tennessee’s position is that its sports event contracts are wagers and therefore fall under state law. The dispute also follows a Sixth Circuit ruling that went against prediction-market arguments in related litigation, so Underdog is pressing its case against unhelpful precedent. The company is in the process of being acquired by IG Group. The matter is live and unresolved, and nothing here predicts how it ends.
Note what this fight is not about. Nobody is arguing over how much skill it takes to pick a roster. The contested question is which government gets to classify the product at all. If you want the underlying mechanics, our explainer on how prediction markets and event contracts differ from sportsbook odds covers the structure Tennessee is objecting to.
Four ways to lose the same argument
Contest classification is not a single test. An operator can satisfy one authority’s definition and fail another’s in the same calendar year, because different bodies ask different questions. This is the core of why these disputes never end cleanly.
| What gets tested | Who applies it | The question asked | Seen in |
|---|---|---|---|
| Preponderance of skill | Courts | Does skill dominate the outcome? | Indian High Courts on fantasy formats |
| State wagering law | State regulators and attorneys general | Is this a bet on a sporting event? | Tennessee’s cease-and-desist to Underdog |
| Federal market oversight | Federal courts and agencies | Is this a regulated exchange product? | Underdog’s injunction claim |
| Legislative prohibition | Parliament or legislature | Should stake-based play be allowed at all? | India’s 2025 online gaming law |
Why operators fight injunctions instead of settling once
A settlement binds the parties to it and nobody else. An operator that reaches an arrangement with one state has settled that state, not the next forty. There is no central authority that can issue a ruling on fantasy contests and have every other regulator accept it, so each new market reopens the question from zero. Meanwhile a cease-and-desist is immediate and an injunction is slow, which means the practical cost of fighting is usually paid in suspended contests long before any judgment arrives.
Operators also have a strong incentive to litigate rather than concede. Conceding that a product is a wager means applying for a wagering licence, paying wagering tax rates, and accepting wagering advertising limits in every market that copies the reasoning. The cost of a bad precedent is larger than the cost of a lawsuit, so they sue.
India already ran this experiment, and Dream11 won it
Indian courts settled the skill question in fantasy sports’ favour and it still did not protect the format. That is the part worth sitting with.
The legal foundation goes back decades: the Supreme Court’s reasoning on rummy and on horse racing established that games where skill predominates over chance sit outside gambling prohibitions. High Courts applied that preponderance-of-skill test to Dream11’s contest format and found it was a game of skill, and the Supreme Court declined on more than one occasion to disturb those findings. For a stretch, Indian daily fantasy sports looked like the most legally secure real-money product in the country.
Then the ground moved twice. First at state level, where governments including Telangana, Andhra Pradesh, Assam, Odisha and Nagaland restricted or banned real-money online games, and where attempts at prohibition in Tamil Nadu and Karnataka were challenged in their High Courts, with the law repeatedly rewritten after each round. A player’s legal position depended on their postal address, not on the game. Second, and decisively, Parliament passed the Promotion and Regulation of Online Gaming Act in 2025, which prohibits online money games played for stakes without carving out skill-based formats. Dream11 and its competitors moved to free-to-play. On top of that, GST on the full face value of deposits had already reshaped the economics, and with effect from 22 September 2025 the rate on online money gaming was raised from 28% to 40%, still on the full face value.
So the popular answer was right. Fantasy sports is, under the Indian judicial test, a game of skill. It was right for the wrong reason, because players read a court finding about game mechanics as a guarantee about business continuity. A legislature does not need to disprove skill. It can simply decide that stake-based play is prohibited regardless, and that is what happened.
Why no market settles this permanently
Three structural facts keep the question open. Gambling law is fragmented by design, written state by state in the US and state by state in India, with central legislation layered on top. Operators expand faster than regulators write rules, launching in a market and discovering its position only when the enforcement letter arrives. And there is no shared definition anywhere of where a contest ends and a wager begins, which is exactly the gap that pick’em formats, DFS-style products and event contracts all live in.
That last gap is widening rather than closing. The same underlying event, a player’s point total, can be sold as a fantasy entry, a sportsbook prop, or an exchange contract, with three different regulators and three different rulebooks. We have written separately on the regulatory gap between licensed sportsbooks and contract-based products, and it is the same fault line Tennessee is now standing on.
What an injunction does to your entries and your balance
Legal exposure in these disputes sits with the operator, not with the player. No Indian player has been the target of a fantasy sports classification case. What players carry instead is operational risk, and it is real.
When a regulator issues a cease-and-desist or a court grants an injunction, contests in that jurisdiction stop accepting entries, open contests may be voided or settled early, and withdrawals can slow while the platform reorganises or exits. Funds in a licensed, segregated account are usually returned. Funds held with an offshore operator with no local licence and no segregation requirement are a different matter, because there is no regulator with any obligation to you.
Before depositing, check what is verifiable rather than what is advertised: which entity actually holds the licence and in which jurisdiction, whether your state restricts real-money play, how player funds are held, and what the terms say about contest cancellation and refunds. A licence is the only part of this that a regulator will enforce on your behalf, which is why what an online gaming licence actually checks matters more than any marketing claim about fairness. Treat entry fees as money you can afford to lose, set deposit limits, and use the self-exclusion tools a licensed operator is required to provide.
What is still unsettled
Underdog’s Tennessee claim will produce a ruling on federal versus state authority over event contracts, and nothing more. It will not define a contest, will not bind another state, and will not stop the next attorney general from sending the next letter. The skill argument that Dream11 won in India is now largely beside the point there, and the argument Underdog is making in Nashville is about jurisdiction rather than mechanics.
Which leaves the question a player has to answer themselves: not whether the game you are playing involves skill, but which authority has claimed it, and what that authority is actually obliged to do for you if the contests stop tomorrow.