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The battle over prediction markets in Arizona has reached a new stage, with state regulators formally moving against Underdog. On December 5, the Arizona Department of Gaming issued a notice of violation and declared its intention to revoke the company’s fantasy sports contest operator license.
This move follows Underdog’s partnership with Crypto.com and the rollout of sports event contracts across multiple states, products that the department has classified as illegal gambling under Arizona law.
“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,” the regulator stated in the letter.
Underdog has been licensed in the state since August 23, 2021, but its operations may end soon. “Underdog’s relationship with Crypto is an association that poses a threat to the public interest of this State. As a result, the Department hereby provides Underdog notice of its intent to revoke fantasy sports contest operator license FS200008,” the letter added.
First of its kind, but Underdog vows to fight back
Arizona’s move against Underdog marks the first time a state gaming commission has pushed to revoke a sports betting or fantasy sports license over ties to prediction markets. Regulators in several states have already warned operators that involvement in these markets could put their licenses at risk.
Arizona Department of Gaming Director Jackie Johnson shared the agency’s position, telling Sports Betting Dime:
“The Arizona Department of Gaming is committed to thoroughly investigating and evaluating the suitability of our licensees that maintain relationships with operators conducting illegal, unlicensed gaming activity in Arizona. When unsuitable conduct is occurring, the department will take enforcement action consistent with its statutory authority to protect consumers, preserve lawful gaming revenues to the state and maintain public confidence in Arizona’s regulatory framework.”
Underdog has until early January to appeal or request a formal hearing. The company’s legal team has already told the media about its intent to fight the decision. Nicholas Green, Underdog’s general counsel, stated, “Arizona regulators are trying to supersede federal law, which they cannot do. We will vigorously defend against this illegal action.”
The company has also continued to list Arizona as active for its “champions” and “draft” fantasy contests, while noting that its prediction markets have never been offered in the state.
Should other operators be worried?
For now, Underdog is the only company in Arizona to receive a formal notice of violation, but regulators have made it clear that every license holder is expected to comply with state law.
When asked if more operators could face similar action, an ADG spokesperson said the department expects “all licensees to follow the law,” while refusing to discuss possible enforcement against others.
Underdog’s partner, Crypto.com, was not the only prediction market operator to receive a cease-and-desist letter from the ADG back in May. Kalshi also received one, with the regulator arguing that there was “no meaningful difference” between sports contract trading and event wagering. It then issued a warning about a possible license revocation to fantasy and sportsbook operators in September.
Despite the letters and warnings, PrizePicks continues to partner with Kalshi, while Fanatics and Crypto.com also have an ongoing deal. Even Fanatics recently announced the launch of its own Fanatics Markets, with FanDuel and DraftKings also working on releasing their prediction platforms in the coming weeks.
At the National Council of Legislators from Gaming States (NCLGS) Winter Meeting in Puerto Rico on Saturday (Dec 13), Arizona Office of the Governor Senior Policy Advisor Chris Kotterman was again asked if these operators could be next and he stated, “I think the department would look similarly on someone who’s partnering with someone who’s doing the things that we consider to be unlawful in the state of Arizona. But I’m not the director of the department, so I can’t speak to what she might do.”
Underdog’s hectic end to 2025
The pushback in Arizona comes as Underdog announced its exit from North Carolina, its only sports betting market, signaling a possible pivot toward prediction markets.
“We wanted to let you know about an upcoming change in North Carolina: Starting December 17, sports betting will no longer be available via the Underdog platform. Don’t worry. Underdog isn’t going anywhere. You’ll still be able to make fantasy picks, play drafts, and enjoy everything else you love about the app using the same credentials as before,” the company informed players.
It also withdrew from the Missouri sports betting market just days before its launch. This came after it announced a partnership with the Kansas City Royals for one of the state’s tethered betting licenses.
