Underdog Fantasy is fully exiting New York after reaching an agreement with the New York State Gaming Commission (NYSGC). The agreement also includes Underdog paying a roughly $18 million settlement fee. While it is losing that market, it is rolling out its peer-to-peer Champions Pick’em product in two new states.
The fantasy and sports betting operator first entered the state in July 2020, operating without a license until December 2022. At that point, Underdog acquired Synkt Games, assuming its temporary license in the process. The state first started issuing temporary interactive fantasy sports (IFS) licenses in 2016 and, to date, have not issued any permanent licenses in the category.
Issue revolved around license, not games offered
Per the settlement agreement, the NYSGC determined that Underdog was offering contests that were not set forth as part of the terms and conditions of Synkt’s temporary license, which was obtained in 2016:
“Since December 22, 2022, Underdog Fantasy has been offering some IFS contests within the meaning of the terms and conditions set forth in a temporary permit the Commission issued to Synkt and has been offering some IFS contests that are not within the meaning of the terms and conditions set forth in a temporary permit the Commission issued to Synkt.”
The settlement focused on the games violating the terms and conditions of the original license and did not mention the nature of the games being in violation of specific regulations.
“For nearly a decade, fantasy sports in New York has operated in regulatory uncertainty, including licensing delays limiting consumers’ choices to only a couple of legacy operators. 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 Underdog’s General Counsel Nicholas Green.
The settlement also noted that Synkt failed to pay taxes on earnings from fantasy. Underdog has agreed to pay the back taxes on those earnings as part of the settlement.
The settlement also states that Underdog, which operates a sportsbook in North Carolina and intends to enter the Missouri sports betting market, does not disqualify the company from seeking a permanent fantasy license or some other form of gaming license in the state. Underdog currently has an active application for a permanent fantasy license in the state.
New York passed a bill to explicitly legalize and regulate daily fantasy sports in 2016, but a court challenge to the law delayed regulatory proceedings until 2021 and the adoption of formal regulations until just last year.
The NYSGC voted to adopt a set of regulations that includes a prohibition on contests “based on proposition betting or contests that have the effect of mimicking proposition betting” in October 2023, then finalized those regulations in June 2024. The process for applying for and receiving permanent licenses is only now getting underway.
PrizePicks ceased offering real-money games in New York in February 2024 after reaching a settlement with NYSGC that included a $15 million fine. PrizePicks never obtained a temporary license to operate in the state.
State Sen. Joseph Addabbo introduced a bill last year to expand the definition of fantasy sports to include a wider range of games that stalled in the Finance Committee. He reintroduced that measure in January of this year.
Underdog Champions launching in NJ and DE
While Underdog is exiting one of the largest fantasy markets in the country, it is planting a flag new jurisdictions.
The company is rolling out its Pick’em Champions game in New Jersey and Delaware. Underdog was live in New Jersey prior to this and just did not operate any version of Pick’em. This is its first entree into Delaware.
“New Jersey and Delaware have been at the forefront of modern sports gaming regulation, and bringing our Pick‘em Champions game to those states is yet another endorsement from highly respected gaming regulatory bodies of the product we built, which much of the industry has now replicated,” added Green.
