Underdog Lost Arizona DFS License Due to Prediction Markets. Others Could Be Next.
Posted on: December 15, 2025, 06:22h.
Last updated on: December 15, 2025, 06:22h.
- Last week, Arizona pulled Underdog’s fantasy sports license amid the company’s prediction markets push.
- Analyst says Fanatics, PrizePicks at risk of similar fate.
- DraftKings, FanDuel appear safe in the state.
Last week, Arizona regulators yanked Underdog’s fantasy sports license as the company pushes into prediction markets, marking the first example of a daily fantasy sports (DFS) or sportsbook operator losing a state permit due to involvement in the event contracts space.
In partnership with Crypto.com, Underdog launched its prediction market offering in September, becoming the first DFS or sportsbook license holder to do so. Citizens equity research analyst Jordan Bender said it’s likely Arizona pulled Underdog’s fantasy sports license first because the company had the longest running prediction markets exposure of the various permit holders there. However, Underdog is unlikely to be the last gaming company to lose its Arizona license.
The two major companies we believe this will impact are Fanatics, with a high-single-digit handle market share in AZ (gaming license), and PrizePicks (fantasy license),” observes the analyst. “Fanatics launched Fanatics Markets two weeks ago with Crypto.com, and PrizePicks has a relationship with Kalshi and Polymarket.”
Kalshi and Polymarket have received cease and desist letters from Arizona regulators. Last Friday, Crypto.com pulled its full suite of event contracts out of Arizona while yanking sports derivatives in Illinois, Maryland, Massachusetts, Michigan, Nevada, New Jersey, and Ohio — all of which permit online sports betting.
‘Can of Worms’ Opened in Arizona
Bender says the Underdog situation in Arizona “opens a can of worms” regarding the actions states can take against gaming companies that pursue prediction markets.
From coast-to-coast, states where sports betting is permitted have been consistent in telling operators that if they forge into prediction markets, their licenses will be jeopardized. Still, Underdog’s fate in Arizona reveals regulatory inconsistencies.
“The picking and choosing from the state creates some uncertainty with the inconsistency in Arizona’s line of thinking, in our view,” adds Bender. “For example, the state awarded Bet365 a gaming license during a time it had black market exposure in China but is now stripping a license for an offering not even in its state.”
The analyst also notes Underdog’s plight in Arizona isn’t unique and that’s just a matter of time before the state pulls the licenses of other operators.
DraftKings, FanDuel Appear Safe in Arizona
FanDuel and DraftKings are the two largest sportsbook operator in the US and in Arizona, they’re the only companies possessing both fantasy sports and sports wagering permits. For now, both operators appear safe in that state.
Both are getting into prediction markets, but in the states where they hold sports wagering permits, the plan is to not offer sports event contracts. For FanDuel, that’s made feasible via its partnership with CME Group. DraftKings has its own levers to pull to potentially dance on the floors of both prediction markets and sports wagering.
“We believe both of these companies took the cleanest way possible to avoid friction with states and, on the surface, should not be impacted by the decision out of Arizona,” concludes Bnder. “We would even argue DraftKings’ acquisition of Railbird solves this issue by providing flexibility in a sense whereby it can tailor its offering around fluid changes in regulations over time.”
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