Arizona aims to shut down Underdog Fantasy over predictions

Summary

The Arizona Department of Gaming (ADG) has issued a formal Notice of Violation and threatened to revoke Underdog Sports, LLC’s fantasy contest licence over the company’s involvement with prediction markets. ADG says designated contract markets (DCMs) such as Crypto.com have been selling event contracts to Arizona residents without a state licence; despite cease-and-desist correspondence, Crypto.com allegedly continued to operate in Arizona.

ADG told Underdog it will consider any relationship between a licencee (including related entities and subsidiaries) and parties offering event contracts in Arizona when assessing suitability to hold a licence. Underdog acknowledges that a wholly owned subsidiary, UDM Services, LLC (d/b/a Underdog Predict), provides technology services to a federally regulated exchange (CDNA/NADEX/Crypto) for sports-based event contracts and that those markets are available via Underdog in 18 states, but says it is not providing those services to persons physically located in Arizona and has no plans for non-sports prediction markets.

The Department has reminded licencees that it may deny, suspend, revoke, or place conditions on licences and that conduct in other jurisdictions or associations with unlicensed operators can affect ongoing suitability. ADG’s communications to Underdog include letters sent in 2025 (May, June, September, October and November responses) and culminate in the December notice of potential licence revocation.

Key Points

ADG alleges some DCMs (e.g., Crypto.com) are selling event contracts in Arizona without state authorisation and have been sent cease-and-desist letters.
Underdog’s subsidiary, UDM Services, LLC (Underdog Predict), provides technology services to a federally regulated DCM (CDNA/NADEX/Crypto) for sports event contracts.
Underdog states those services are not being offered to persons physically located in Arizona and are available on its platform in 18 states.
Arizona warns it will evaluate relationships and conduct of licencees, including related entities and actions in other jurisdictions, when determining licence suitability.
The ADG can suspend, revoke, fine or place conditions on licences and has already sent inquiry and warning letters to industry participants.
Underdog has applied for FCM/IB licences via subsidiaries (applications pending with the NFA), which ADG may view as material to suitability determinations.

Why should I read this?

Because if you follow fantasy sports, prediction markets or gambling regulation, this is the kind of enforcement that can change who can legally offer prediction contracts and where. Short version: Arizona’s regulator is signalling it will hold licencees (and their subsidiaries) to account for ties to prediction markets — and that could ripple across the industry. We’ve done the reading so you don’t have to — this could affect operators, investors and regulators alike.