Underdog Fantasy agrees to $17.5m settlement with New York
The world of fantasy sports has seen its fair share of regulatory challenges, and Underdog Fantasy is the latest to face significant hurdles in New York. In a recent settlement with the New York State Gaming Commission, Underdog agreed to pay a substantial $17.5 million fine and temporarily cease offering fantasy games in the state.
This move comes after the company began operating in New York without the necessary license and later acquired Synkt Games, which held a temporary permit.
Regulatory background and settlement details
Underdog Fantasy began offering fantasy contests in New York back in July 2020, but it did so without obtaining an interactive fantasy sports license. Later, in December 2022, the company acquired Synkt Games, which had a temporary permit in the state. However, even after this acquisition, not all of Underdog’s offerings aligned with the terms of the temporary permit.
According to the settlement agreement, Underdog offered some contests that fell within the permit’s conditions, while others did not. This discrepancy led to the significant fine and the company’s decision to exit the New York market temporarily.
Nicholas Green, Underdog’s general counsel, clarified that the issue was not related to specific game formats, such as the controversial pick’em style games. Instead, he attributed the problem to a unique licensing issue specific to New York.
Green noted, “Any fantasy game created after 2015, no matter the format, is not permitted under the commission’s interpretation of what games a temporary permitholder, like Underdog, can and cannot offer.” He also highlighted that the high fine amount reflects the popularity of Underdog’s games, as it was calculated based on the company’s revenue in New York.
Regulatory uncertainty in New York
The regulatory landscape for fantasy sports in New York has been uncertain for nearly a decade. Since 2016, operators like FanDuel and DraftKings have been operating on temporary permits due to legislative terms and subsequent legal challenges.
The state has yet to issue permanent licenses, which has limited consumer choices and created an environment where only a few legacy operators dominate the market. Green expressed Underdog’s disagreement with the commission but acknowledged that the settlement provides clarity on licensing issues. He stated, “The settlement recognises that Underdog worked in cooperation with the commission and operated at all times in a good faith interpretation of state law.”
Future plans and market expansion
Despite the temporary exit from New York, Underdog remains optimistic about its future in the state. The company has an active application for permanent licensure, which will be reviewed as part of the settlement.
Underdog expects to offer its contests to New Yorkers again soon while expanding its operations in other states. It plans to launch its peer-to-peer Pick’Em Champions product in New Jersey and Delaware later this month. This move highlights Underdog’s commitment to growing its presence in the fantasy sports market, even as it navigates regulatory challenges in key states like New York.
Commission Chair Brian O’Dwyer emphasised the importance of playing through permitted operators, stating, “This settlement is another example of the gaming commission looking out for the gaming public.”
As Underdog works towards resolving its licensing issues in New York, it joins other companies like PrizePicks, which recently settled with the state for nearly $15 million. These developments demonstrate the ongoing regulatory scrutiny in the fantasy sports industry and the need for operators to comply with state regulations to ensure consumer protection.
