Arizona Links Underdog to Crypto.com Prediction Markets

The Arizona Department of Gaming (ADG) has issued a notice of intent to revoke Underdog Fantasy’s daily fantasy sports (DFS) license, citing license suitability concerns due to Underdog’s partnership with Crypto.com to offer prediction markets.

Sports Betting Dime broke the news. State officials later confirmed the action and its rationale at the National Council of Legislators from Gaming States (NCLGS) Winter Meeting. Arizona regulators framed the action as part of a broader effort to prevent licensed operators from facilitating what the state considers illegal gambling products.

ADG Ties Enforcement to Prediction Markets

According to Sports Betting Dime, the ADG’s revocation notice centers on Underdog’s involvement in sports prediction markets — particularly its partnership with Crypto.com, which Underdog announced in September.

In an emailed response to media inquiries, ADG said:

“ADG has determined that Underdog, by contracting with Crypto, benefitting from Crypto’s services, supporting Crypto’s interests, and providing financial support to Crypto is aiding and abetting Crypto’s illegal conduct in Arizona and providing it with a façade of legitimacy.”

“Moreover, and in the same fashion, Underdog’s relationship with Crypto is an association that poses a threat to the public interest of this State.“

Due to those findings, ADG plans to revoke Underdog’s DFS license. The enforcement position aligns with the regulator’s previous warning to licensees about operating or collaborating with prediction market platforms.

What Arizona Officials Said at NCLGS

At the NCLGS Winter Meeting, Arizona officials provided more insight into the decision.

Speaking during a panel discussion, Chris Kotterman, a senior policy advisor in the Arizona Governor’s Office, stated that the state concluded Underdog was associated with activity Arizona considers illegal gambling.

Kotterman noted that Arizona had sent a cease-and-desist letter to Crypto.com in the spring. According to Kotterman, Crypto.com did not comply. Instead, it subsequently partnered with a state licensee, a development that Arizona regulators viewed as particularly concerning.

Underdog Plans to Challenge the Action

Underdog has indicated it intends to challenge Arizona’s action, arguing that the state is attempting to exceed its authority.

In a statement, Underdog General Counsel Nicholas Green said that ADG is seeking to regulate federally overseen products. He maintained that sports prediction markets fall under the jurisdiction of the Commodity Futures Trading Commission (CFTC) rather than state gaming agencies.

Underdog has 30 days from the December 5 notice to appeal, something the company plans to do. If the dispute proceeds to litigation, Arizona would be the latest state to challenge sports event contracts in court. Litigations are ongoing in Connecticut, New York, Massachusetts, Maryland, Nevada, and New Jersey.

Underdog’s Strategic Pivot Toward Prediction Markets

The Arizona action comes as Underdog has been reshaping its U.S. footprint around prediction markets.

The company appears to be pivoting into a federally regulated format, as evidenced by recent withdrawals from sports betting. Underdog notified customers in North Carolina that it would cease offering sports betting in the state on December 17.

That decision followed Underdog’s withdrawal from Missouri just days before the sports betting market launched on December 1. Mike Leara, executive director of the Missouri Gaming Commission, told local news outlets that the decision was due to Underdog’s pivot into prediction markets.

Once it exits North Carolina’s sports betting market, the company will no longer offer a sportsbook. Meanwhile, it provides parlay-style prediction markets in over 20 states, including California and Texas. Notably, Arizona is not one of them.

Broader Industry Implications

Arizona’s enforcement action against Underdog comes amid a rapidly expanding landscape of prediction markets, with other licensees entering the sector.

Fanatics, which operates a licensed sportsbook in Arizona, recently launched a prediction market product. Notably, the operator also partnered with Crypto.com.

Underdog’s DFS rival, PrizePicks, has also entered prediction markets through a partnership with Kalshi. Arizona’s cease-and-desist order in the spring also included Kalshi. That raises questions about whether the regulator will take similar action against other licensees connected to those platforms.

Furthermore, sports betting industry leaders and Arizona licensees, FanDuel and DraftKings, are also gearing up to launch their own prediction market products.