Analysis of Underdog’s Arizona License Loss and Its Impact on Major Fantasy Sports Operators

Background: Why Underdog Lost Its Arizona License

Underdog recently had its fantasy sports license revoked in Arizona, primarily due to its association with Crypto.com and its interest in the prediction markets sector. This action reflects a wider regulatory crackdown on event contracts, which many authorities view as unlicensed sports betting.

The Growing Interest in Prediction Markets

Despite regulatory concerns, prediction markets have been rapidly gaining popularity, attracting attention from major sportsbooks in the United States. Well-known operators like DraftKings and FanDuel have shown keen interest in entering this emerging area by planning to launch their own prediction market products.

Underdog’s Partnership and Regulatory Repercussions

Underdog’s collaboration with Crypto.com appears to have triggered Arizona regulators to revoke its license, even though neither company was actively offering prediction markets in the state at the time. This sudden decision raised concerns about the potential risk faced by other operators in the market.

Are Major Operators at Risk?

According to an analyst from Citizens, DraftKings and FanDuel have approached the introduction of prediction market products with careful consideration to avoid regulatory violations. The analysis suggests that these companies have not breached any rules that would jeopardize their licenses.

Potential Risk for Smaller Operators

Conversely, smaller operators might face challenges. The analyst mentioned that companies like Fanatics and PrizePicks, which hold a significant market share in Arizona, could be vulnerable. Fanatics has partnered with Crypto.com to offer prediction market products, mirroring Underdog’s approach. PrizePicks collaborates with Polymarket and Kalshi, entities that have been issued cease and desist orders by Arizona regulators.

Inconsistencies in Arizona’s Regulatory Actions

The analyst also pointed out inconsistencies in Arizona’s enforcement strategy. For example, while Underdog faced immediate penalty for its Crypto.com partnership, bet365 was granted a license despite operating without authorization in China concurrently.

Other Developments

In related news, Underdog has recently ceased its sportsbook operations in North Carolina, marking a significant shift in its business activities.