Underdog drops fantasy sports in seven states to preserve prediction market platform
Underdog has withdrawn its fantasy sports product from seven unnamed states. The operator concluded that maintaining a patchwork of state fantasy licenses is less valuable than preserving its federally regulated prediction market platform. The move reflects widening jurisdictional tension between state gaming authorities and CFTC-registered venues. Underdog now operates its prediction market under a Designated Contract Market license, betting that federal commodities law will shield it from state gambling oversight.
Underdog's retreat signals that operators now rank federal CFTC standing above state fantasy licenses. The calculation affects every dual-product platform weighing similar cuts. States are separately deciding how to treat prediction markets under local law, so the seven-state gap Underdog left may not stay empty; rivals could chase those fantasy users while Underdog bets on commodities preemption.
But the Ninth Circuit already stripped Kalshi's Nevada shield, and Connecticut, New Jersey, and Baltimore have filed parallel suits. Each state victory against preemption makes Underdog's federal bet riskier. If another circuit joins the Ninth, platforms without state fallback licenses face forced geofences with no revenue patch. Traders lose liquidity as legal geography fragments.