In a significant shift within the sports betting landscape, Crypto.com has withdrawn its sports event contracts from Arizona as of December 2, as well as its prediction markets by December 12. The company has further clarified that it does not offer such contracts in several other states, including Michigan, Maryland, Massachusetts, Illinois, New Jersey, New York, Nevada, and Ohio.
This decision follows recent developments regarding Underdog, which is facing the revocation of its fantasy sports contest license in Arizona due to its partnership with Crypto.com. The Arizona Department of Gaming communicated on December 5 that this partnership contributed to the illegal nature of the prediction markets operated by Crypto.com, prompting the state to revoke Underdog’s license, marking a first for any state gaming commission in taking such action against a gaming license based on affiliation with prediction markets.
Underdog had recently introduced Underdog Markets in September, a service enabling customers to trade sports event contracts across major leagues, all while operating under a partnership with Crypto.com. Despite the partnership, Underdog Markets had not gone live in Arizona, but concerns surrounding its connection to Crypto.com were significant enough to prompt regulatory scrutiny.
The Arizona Department of Gaming concluded that Underdog was complicit in Crypto.com’s illegal operations in the state, a situation that raised alarms regarding public interest and compliance with state regulations. A letter from the department stated, “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.”
While Underdog is currently the only operator in Arizona to have its license revoked, other companies in the state maintain similar partnerships. However, Fanatics Betting and Gaming is among those that have formed a collaboration with Crypto.com, yet it launched its own prediction market service, Fanatics Markets, just a day after Crypto.com’s exit from Arizona’s market.
PrizePicks has also entered the prediction market arena, announcing its offerings through its subsidiary, Performance Predictions II, launching on November 15. This company recently established a partnership with Kalshi to facilitate contract availability in several states, although its offerings are not available in Arizona.
The regulatory landscape for prediction markets has entered a contentious phase as several states including Maryland, Massachusetts, New Jersey, New York, Nevada, and Ohio are currently engaged in litigation concerning prediction markets, all of which stem from issued cease-and-desist notices. There’s ongoing debate about the legitimacy and regulation of sports event contracts, with companies like Crypto.com, Robinhood, and Kalshi asserting that oversight should fall under the federal government’s authority rather than state regulatory bodies.
In response to inquiries regarding the potential ramifications for other fantasy sports and sports betting licensees in Arizona linked to similar partnerships, the Arizona Department of Gaming emphasized the importance of legal compliance for all licensees but refrained from commenting on specific enforcement actions.
As the landscape continues to evolve, observers remain keenly interested in how regulatory bodies across various states will navigate the complex relationship between fantasy sports operators, prediction markets, and sports betting contracts.
