Arizona Moves to Revoke Underdog Fantasy Licence

The Arizona Department of Gaming (ADG) has taken enforcement action against fantasy sports operator Underdog, issuing formal notice of its intention to revoke the company’s state licence following its expansion into prediction markets and a commercial relationship with Crypto.com.

The decision follows Underdog’s September rollout of prediction market products within its app, which are now available in 24 U.S. states. According to the ADG, this development places the operator in breach of Arizona’s regulatory framework for fantasy sports contest providers.

Regulatory Objections to Crypto.com Partnership

In its notice, the ADG stated that Underdog’s contractual and financial ties with Crypto.com effectively support activity the regulator considers unlawful within the state. The department argued that by benefiting from Crypto.com’s services and contributing to its operations, Underdog is enabling conduct that lacks regulatory approval in Arizona.

The regulator further claimed the partnership undermines public interest protections, asserting that the association risks granting legitimacy to unlicensed prediction market activity. As a result, the ADG announced its intent to revoke Underdog’s fantasy sports operator licence, which has been active since August 2023.

Underdog has reportedly initiated an appeal and has 30 days to challenge the decision under Arizona administrative procedures.

First State to Act on Prediction Market Warnings

Arizona becomes the first U.S. jurisdiction to move beyond warnings and formally enforce sanctions against a licensed operator over prediction market involvement. Regulators in at least six other states including Connecticut, Illinois, Massachusetts, Michigan, Nevada and Ohio have previously cautioned licensed betting and fantasy sports companies against engaging in prediction markets.

The issue has gained urgency as major sportsbook brands FanDuel and DraftKings prepare to launch their own prediction market platforms. Despite voluntarily exiting the American Gaming Association and ceasing Nevada operations, neither operator has yet faced licence revocation elsewhere.

Industry Impact and Wider Scrutiny

The move has intensified scrutiny across the U.S. gambling sector, with operators and regulators closely monitoring whether additional states will follow Arizona’s approach. The dispute highlights growing uncertainty around where prediction markets sit within existing gambling and fantasy sports regulations and whether they could disrupt the established licensing and taxation model.

Underdog Scales Back State Operations

Underdog has recently reduced its regulated sports betting footprint. Earlier this month, the company withdrew its temporary sports betting licence application in Missouri shortly before the state’s market launch, though it continues to hold a DFS permit there. Missouri Gaming Commission Executive Director Mike Leara commented that Underdog appears to be prioritising prediction markets, which currently operate outside traditional regulatory and tax structures.

The operator has also exited sports betting in North Carolina and is set to fully cease operations in the state on December 16.

As regulatory pressure builds, Underdog’s standoff with Arizona could become a defining test case for how U.S. gambling authorities respond to the rapid expansion of prediction markets.