Arizona Regulator Revokes Underdog’s Fantasy Sports License

Underdog is already feeling the blowback from its new sports prediction market platform.

The Arizona Department of Gaming (ADG) has announced it is revoking Underdog’s fantasy license to operate in the state. The sports betting regulator confirmed it was a result of the operator's decision to launch a prediction platform, despite not offering it in Arizona. It is the first state to take action against Underdog and its partner, Crypto.com. 

While the notification was sent to the operator on December 5, the Sports Betting Dime uncovered the story after an open records request.

Massive Blow For Underdog

The ADG's decision delivers a massive blow to the DFS giant. While Underdog had already sacrificed its small sports betting business in favor of predictions, the expectation was that its DFS platform would be largely unaffected. Arizona is proving that assumption to be false.

Underdog’s bread and butter has been DFS, where they remain one of the country’s top operators. That success gave them a safety net when entering the sports betting industry. Underdog hoped it would also cover the company’s attempt to break into the competitive prediction market.

Other states have warned about similar actions regarding prediction markets, suggesting more could soon follow Arizona’s lead. If Underdog is unable to stop the crackdown, it could spell disaster.

Underdog Decries Illegal Action

Underdog will now have one month to respond to the ADG’s notification of the intent to revoke their license. While that has yet to be filed, the operator is expected to argue that Arizona is unfairly targeting them, similar to those made by their industry rivals.

While the ADG is declaring sports contracts as a form of gambling, it cannot ban operators. The industry is considered to be a form of commodity training, meaning only the Commodity Futures Trading Commission (CFTC) has the authority to regulate it.

Underdog will likely cite the industry’s legal standing in its response, arguing that Arizona is targeting a legal platform to protect tax revenue generated by its legal sports betting market.

Are Sportsbooks Next?

The warning from regulators in states like Arizona also included sportsbook operators. While Underdog gave up its sports betting platform in favor of prediction, Fanatics is now offering both on a far larger scale. The operator has quickly grown its online sportsbook, and recently beat out FanDuel and DraftKings by launching its own prediction platform.

With Fanatics’ top two rivals set to launch prediction markets soon, regulators will need to decide if they can enforce their warnings. Pulling a DFS license is one thing, but revoking a sports betting license from the country’s top three operators is another. It would risk those operators shuttering their sportsbooks and bringing customers over to their prediction platforms.