Underdog Fantasy Slapped With Multi-Million Dollar Regulatory Fine in New York

Underdog Fantasy has been fined $17.5 million for operating outside the scope of its temporary license and has chosen to leave New York with the hope it can return with a permanent license.

Leaving New York

Underdog Fantasy has reached an agreement with the New York State Gaming Commission to pay a $17.5 million fine and has announced it is leaving the Empire State, at least temporarily until a permanent license can be issued.

“This settlement is another example of the Gaming Commission looking out for the gaming public,” said Commission Chair Brian O’Dwyer. “We encourage fantasy sports players to play only through permitted or registered operators that are subject to our comprehensive regulations that protect New Yorkers.”

There is a fine line between daily fantasy sports (DFS) and sports betting, one that has been blurred by pick’em contests being run by DFS operators that mimic parlay betting. Many online sportsbooks believe there is no distinction and that those contests take a bite out of their sports betting business, one that relies heavily on their cash cow, parlay wagering.

The regulatory breach is cited as Underdog offering “pick’em” and “draft” contests under a temporary interactive fantasy sports (IFS) license it obtained through its acquisition of Synkt Games in December 2022. The subsidiary’s temporary IFS license was issued in 2016, but the ruling states that Underdog’s two contests were not created when Synkt was issued the license; therefore, they are not allowed under the temporary license and are thereby in violation of the code.

Underdog general counsel Nicholas Green issued a statement that said, “It’s a unique, temporary license issue specific only to New York and not related to any specific game format we offer. Any fantasy game created after 2015, no matter the format, is not permitted under the commission’s interpretation.”

Underdog’s competitor in the DFS market, PrizePicks, paid a $15 million fine last year for essentially the same violation, although, unlike Underdog, it had no license to operate during its tenure in New York, which spanned June 4, 2019, through December 19, 2023.

New Markets

Although Underdog is leaving New York, it may not be for good. Because they fully cooperated with the New York Gaming Commission, it has left the door ajar for reinstatement under a permanent license.

“We disagree with the Commission, but the settlement does provide clarity on New York licensing issues. The settlement recognizes that Underdog worked in cooperation with the Commission and operated at all times in a good faith interpretation of state law. We look forward to offering all of our contests again to New Yorkers, and we are working with the Commission to do so as soon as possible,” said Green.

Yet, the company is not standing still in the wake of its recent financial setback, announcing it would be entering the New Jersey and Delaware markets, launching its “Pick’em Champions” contests later this month. That will bring the number of states in which it operates its DFS platform to 36 while also operating as a mobile sportsbook in North Carolina.