Underdog Surrenders Fantasy Licences in Seven States to Keep CFTC-Licensed Prediction Products

Underdog founder and CEO Jeremy Levine announced the change in an official statement on X.

Levine said:

Those states have taken a legal viewpoint we disagree with.

According to his explanation, Underdog had to choose between keeping its state fantasy licences and continuing to offer products licensed through the Commodity Futures Trading Commission framework. The company selected the latter option, preserving its wider product experience while removing Drafts from the relevant states.

Levine described Drafts as the first product launched by Underdog and an important part of the company’s development. He also indicated that the format now receives substantially less usage than its other offerings.

The decision therefore represents both a regulatory response and a product-level commercial calculation. Faced with incompatible requirements, Underdog has prioritised the category it appears to consider more important to its future growth.

Fantasy sports and prediction markets may appear similar to customers because both involve outcomes connected to sporting events. Their legal foundations are different.

Fantasy sports are generally regulated at state level. Licensing conditions, permitted contest formats and consumer-protection requirements can vary significantly between jurisdictions.

Prediction markets use event contracts and may operate under federal commodities regulation. The CFTC’s proposed prediction-market framework is intended to clarify which contracts can be offered and how sports-related markets should be assessed.

The overlap creates uncertainty for multi-product operators. A platform may regard an event contract as a federally regulated financial product, while a state authority may consider the same activity equivalent to sports betting.

Underdog’s withdrawal shows that this disagreement can affect existing licences even when the products are presented as separate verticals.

The explanation for the seven-state withdrawal currently comes from Levine. Regulators in the affected states have not published a consolidated decision establishing a single legal position.

Individual states may have reached similar outcomes through different rules or administrative processes. Competitors should therefore avoid treating Underdog’s decision as evidence of a universal restriction applying to every fantasy and prediction-market operator.

The wider jurisdictional conflict is also being examined by US courts. New Jersey has asked the Supreme Court to determine whether federally regulated prediction markets must follow state sports betting laws.

Massachusetts is considering a related dispute over whether prediction-market contracts constitute unauthorised sports wagering. These proceedings could influence whether operators can rely on federal regulation or must also obtain state-level approval for sports event contracts.

Underdog has said that Drafts contests entered before the cutoff will remain active. Customers will not have existing entries cancelled solely because the company is surrendering its fantasy licences.

Operationally, Underdog must continue supporting these contests while blocking new entries in the affected states. That requires reliable geolocation, account controls, customer communication and jurisdiction-specific product settings.

For the wider industry, the case demonstrates the need to assess how launching a new regulated product could affect existing licences. Federal approval may provide access to prediction markets, but it does not currently remove exposure to state enforcement or licensing consequences.

Underdog has left open the possibility that Drafts could return. Any reinstatement is likely to depend on clearer regulation, court decisions or a revised product structure acceptable to state authorities.