Arizona pulls Underdog’s DFS licence on predictions rift, will others follow?
Summary
Arizona’s Department of Gaming has moved to revoke Underdog’s daily fantasy sports (DFS) licence, citing the company’s partnership with Crypto.com and the offering of sports event contracts (prediction markets) as activities it deems illegal in the state. The decision follows a May cease-and-desist against Crypto.com and related correspondence in September instructing Underdog to stop offering event contracts or partnering with platforms that do.
This is the first known instance of a state regulator specifically pulling a DFS licence over prediction market activity. Underdog says it will vigorously defend the company and intends to appeal, arguing products are not available to Arizona customers and that regulators are overreaching. The move has sparked industry debate about extraterritorial enforcement, suitability assessments and whether other states — especially those with licensed operators partnering on prediction markets — will follow suit into 2026.
Key Points
- Arizona issued a violation notice revoking Underdog’s DFS licence because of its partnership with Crypto.com and involvement with prediction market event contracts.
- The regulator included a May cease-and-desist, a September letter to Underdog, and Underdog’s November response in a 16-page filing asserting “aiding and abetting” and risk to the public interest.
- This appears to be the first instance of a state revoking a DFS licence specifically for prediction market activity, setting a possible precedent.
- Major operators (DraftKings, FanDuel, Fanatics) have connections to prediction markets — DraftKings plans a 2026 launch — raising industry-wide licensing implications.
- Regulators and legal experts are debating extraterritorial reach: whether out-of-state conduct or partnerships should affect in-state suitability and licences.
- Underdog says it will appeal and disputes Arizona’s characterisation; it claims products aren’t offered to Arizona customers and that the state is effectively trying to supersede federal law.
- Louisiana and other jurisdictions are watching; tribal gaming stakeholders warn of intense regulatory and political pressure on prediction markets.
Context and relevance
The decision lands as prediction markets dominate industry discussions and regulatory scrutiny. For operators, the ruling raises questions about how partnerships and third-party platforms affect licence suitability and regulatory risk. For regulators, it signals a willingness to use suitability and consumer-protection arguments to police products viewed as financial derivatives or illegal gambling.
This matter could influence licensing decisions and compliance strategies ahead of planned product launches in 2026. It also spotlights the unresolved tensions between state regulatory authority, interstate product availability and the legal classification of prediction markets.
Why should I read this?
Because if you work in sports betting, payments, compliance or investor relations, this is the kind of regulatory curveball that can change business plans fast. It’s a clear shot across the bows: partnerships with prediction-market platforms could put licences at risk. Read this if you want to know what regulators are focusing on and how firms are likely to respond next year.
Author style
Punchy: this isn’t just a niche enforcement action — it’s a possible precedent that could reshape where and how prediction markets roll out. If you care about licences, launches or who gets regulatory headaches in 2026, the detail matters.