Underdog Fantasy exits New York, preps to enter Delaware, NJ

The New York State Gaming Commission (NYSGC) has imposed significant sanctions on Underdog Fantasy, citing illegal operations within the state.

Underdog Fantasy has been engaged in offering interactive fantasy sports contests in New York since December 22, 2022, leveraging a temporary fantasy license held by Synkt, the parent company that Underdog acquired. However, on March 14, the NYSGC determined that Underdog lacked a legitimate temporary license, thereby rendering it unable to legally provide “certain types” of contests in New York.

As a result, the commission levied a hefty fine of $17.5 million (approximately £13.49 million, €16.05 million). This amount was calculated based on the revenue generated by Underdog’s popular games in New York, as detailed in a communication from Underdog. Following the penalties, Underdog ceased its gaming operations in New York starting March 14.

In a settlement agreement, the NYSGC acknowledged that Underdog “asserts that it [had] operated in New York since December 22, 2022, under a good-faith belief that it had the ability to do so lawfully.” It is important to note that Underdog does not “accept or admit” to any wrongdoing. The company has proposed a structured repayment plan, consisting of 12 installments starting April 1, 2025, and concluding on January 1, 2028. Furthermore, the NYSGC indicated a belief in Underdog’s good faith operation; the company remains eligible to apply for a permanent fantasy or other gambling licenses. Additionally, Synkt is now required to submit tax forms to the NYSGC and fulfill its tax obligations, with any failure to do so potentially impacting future license applications.

Understanding Temporary Licenses: Distinctions and Implications

In light of the NYSGC’s ruling, Underdog has expressed its disagreement with the commission’s decision. The NYSGC emphasized that Underdog cooperated with the investigation, highlighting that the core issue revolves around both the timing of the operations and specific regulations governing temporary licenses.

Across various states, gambling regulators frequently issue temporary licenses for fantasy sports, sports betting, and other gambling activities. While these licenses can expedite the application process, they are more susceptible to revocation than their permanent counterparts. Furthermore, they grant regulators additional time to conduct comprehensive assessments of a company’s operational integrity and financial stability.

“This situation pertains exclusively to the unique temporary licensing framework specific to New York and doesn’t correlate with any particular game format that we provide,” stated Nicholas Green, Underdog’s general counsel, in a press release. “Any fantasy game developed post-2015, regardless of its format, is ineligible under the commission’s interpretation of permissible games for temporary permit holders like Underdog. The magnitude of the fine reflects the popularity of our games, as it was determined based on our revenue within New York.”

The specifics of which contests are now prohibited were not detailed in the NYSGC’s settlement statement; however, Underdog has since confirmed its withdrawal from all contest offerings, explicitly pulling back its “Draft” and “Pick’em” games.

Underdog also stated that it has submitted an application for a permanent fantasy sports license, which is currently under review.

Notably, Underdog’s cooperation with the investigation, coupled with the NYSGC’s indication that the company will be considered for a permanent license in the future, suggests that this settlement should not adversely affect Underdog’s operations in other jurisdictions.

Expanding Horizons: New Offerings in Delaware and New Jersey

In a strategic move, Underdog has announced plans to introduce its “Pick’em Champions” contests in Delaware and New Jersey later this month. Presently, Underdog is operational with pick’em-style games in 36 states and is also offering digital sports betting in North Carolina.

“New Jersey and Delaware have consistently led the charge in innovative sports gaming regulations. The launch of our Pick’em Champions game in these states represents a significant endorsement from the esteemed regulatory bodies, showcasing the product we’ve developed—one that has been widely emulated across the industry,” remarked Green.