Underdog Misplaced Arizona DFS License Resulting from Prediction Markets. Others May Be Subsequent.

• Final week, Arizona pulled Underdog’s fantasy sports activities license amid the corporate’s prediction markets push.
• Analyst says Fanatics, PrizePicks liable to related destiny.
• DraftKings, FanDuel seem protected within the state.

Final week, Arizona regulators yanked Underdog’s fantasy sports activities license as the corporate pushes into prediction markets, marking the primary instance of a each day fantasy sports activities (DFS) or sportsbook operator shedding a state allow on account of involvement within the occasion contracts area.

The Underdog brand. The corporate misplaced its fantasy sports activities license in Arizona and it received’t be the final. (Picture: Underdog Sports activities)

In partnership with Crypto.com, Underdog launched its prediction market providing in September, turning into the primary DFS or sportsbook license holder to take action. Residents fairness analysis analyst Jordan Bender mentioned it’s seemingly Arizona pulled Underdog’s fantasy sports activities license first as a result of the corporate had the longest working prediction markets publicity of the assorted allow holders there. Nonetheless, Underdog is unlikely to be the final gaming firm to lose its Arizona license.

The 2 main firms we imagine this can impression are Fanatics, with a high-single-digit deal with market share in AZ (gaming license), and PrizePicks (fantasy license),” observes the analyst. “Fanatics launched Fanatics Markets two weeks in the past with Crypto.com, and PrizePicks has a relationship with Kalshi and Polymarket.”

Kalshi and Polymarket have obtained stop and desist letters from Arizona regulators. Final Friday, Crypto.com pulled its full suite of occasion contracts out of Arizona whereas yanking sports activities derivatives in Illinois, Maryland, Massachusetts, Michigan, Nevada, New Jersey, and Ohio — all of which enable on-line  sports activities betting.

‘Can of Worms’ Opened in Arizona

Bender says the Underdog state of affairs in Arizona “opens a can of worms” concerning the actions states can take in opposition to gaming firms that pursue prediction markets.

From coast-to-coast, states the place sports activities betting is permitted have been constant in telling operators that in the event that they forge into prediction markets, their licenses can be jeopardized. Nonetheless, Underdog’s destiny in Arizona reveals regulatory inconsistencies.

“The selecting and selecting from the state creates some uncertainty with the inconsistency in Arizona’s line of pondering, in our view,” provides Bender. “For instance, the state awarded Bet365 a gaming license throughout a time it had black market publicity in China however is now stripping a license for an providing not even in its state.”

The analyst additionally notes Underdog’s plight in Arizona isn’t distinctive and that’s only a matter of time earlier than the state pulls the licenses of different operators.

DraftKings, FanDuel Seem Protected in Arizona

FanDuel and DraftKings are the 2 largest sportsbook operator within the US and in Arizona, they’re the one firms possessing each fantasy sports activities and sports activities wagering permits. For now, each operators seem protected in that state.

Each are stepping into prediction markets, however within the states the place they maintain sports activities wagering permits, the plan is to not supply sports activities occasion contracts. For FanDuel, that’s made possible through its partnership with CME Group. DraftKings has its personal levers to tug to probably dance on the flooring of each prediction markets and sports activities wagering.

“We imagine each of those firms took the cleanest manner attainable to keep away from friction with states and, on the floor, shouldn’t be impacted by the choice out of Arizona,” concludes Bnder. “We’d even argue DraftKings’ acquisition of Railbird solves this subject by offering flexibility in a way whereby it will probably tailor its providing round fluid adjustments in laws over time.”