PrizePicks, Underdog Fantasy Ordered To Stop ‘Sports Wagering’ In Wyoming

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PrizePicks and Underdog Fantasy have been ordered to cease operations in Wyoming, according to documents obtained by Legal Sports Report.

The Wyoming Gaming Commission earlier this month sent cease-and-desist letters to PrizePicks and Underdog, accusing both fantasy apps of offering illegal unlicensed sports betting, according to letters seen by LSR. It is the latest strong statement about prop-style, player vs. house fantasy games, which some industry critics argue are de facto sports betting.

“The Wyoming Gaming Commission became aware that your business offers gambling on sporting events to Wyoming residents,” both letters read, “Specifically, your business purports to offer fantasy sports contests but, in reality, the offering appears to fall under the exact definition of “sports wagering” as defined in Wyo. Stat. Ann. § 9-24-101(a)(xii). This offering may violate Wyoming’s gambling laws found inWyo. Stat. Ann. §§ 6-7-101 through -104, §§ 9-24-101 through -106, and Wyoming Gaming Commission’s Online Sports Wagering Rules, Chapters 1 through -9.”

Penalties for those violations include fines as high as $3 million and up to 3 years of jail time, according to the letters.

Scrutiny grows around fantasy sports prop bets

The letters are addressed July 5, a week before FanDuel Head of State Government Relations Cesar Fernandez made headlines for calling out “illegal sportsbooks” posing as fantasy-sports operators.

PrizePicks and Underdog offer pick’em games in 30 states, including ones that have rejected sports betting legalization efforts including California and Texas.

Unlike traditional daily fantasy sports, these games pit the users against the house, not other players. They allow users to pick whether or not a combination of athletes will produce more or less than a stat line set by the house, similar to player-prop over/under bets on sportsbooks.

Both companies defended their games as legal under the federal UIGEA skill-based carveout for fantasy sports. FanDuel and DraftKings, the two most-downloaded DFS apps, do not offer pick’em games.

Legal sports betting leads to fantasy probes

Wyoming is not the first state to tangle with the potential overlap between fantasy sports and sports betting.

Regulators in Maryland and West Virginia recently broached the topic with PrizePicks, which led to the company pulling out of both states.

Earlier this year, Prediction Strike left the New Jersey market after a similar cease and desist from state regulators. Meanwhile, Ohio regulators are investigating a handful of websites for similar violations.

DFS coalition statement

The Coalition for Fantasy Sports, which represents Underdog and PrizePicks, did not respond to LSR’s request for comment about the Wyoming situation. The group provided a statement earlier after a Wall Street Journal story about PrizePicks:

“It’s unfortunate DraftKings and FanDuel, the same companies that championed fantasy sports as skill-based for years, have changed their tune at the first sign of competition. It’s a thinly veiled attempt to create a false narrative and position themselves as the only games in town.

“The current legal framework exists largely because of the efforts of these industry incumbents. Unable or unwilling to compete on product, they’re doing what incumbents often do when faced with new competition. The narrative they’re spreading directly contradicts the laws they helped to write and pass – laws that make crystal clear that fantasy sports are not sports betting. Their anti-competitive approach is disingenuous and is bad for consumers.”

PrizePicks, Underdog not subject to Wyoming taxes

Betr founder Joey Levy recently described the fantasy licensing process to LSR as “less financially intensive” compared to sports betting. Betr launched its player vs. house pick’em product in 23 states Monday, and offers sports betting in Massachusetts and Ohio.

In Wyoming, sports betting licenses cost $100,000 for the first five years and an extra $50,000 every subsequent five years. Operators owe a 10% tax on net betting revenue, which includes revenue attributed to promotional or free bets.

They are subject to a lengthy vetting process, which includes reports on internal controls, integrity monitoring and registration with the Secretary of State:

“To operate legally in Wyoming, you will need to obtain an Online Sports Wagering Operator license from the Wyoming Gaming Commission. If your business intends to truly offer fantasy sports contests, you will need comply with the conditions set forth in Wyo. Stat. Ann. § 9-24-101(a)(iv),” the letters read. “Your current business offering, however, as described on your website is considered sports betting and not in compliance with Wyoming’s statutes governing fantasy sports contests.”

Since launching legal sports betting in late 2021, Wyoming has netted more than $1.4 million in tax revenue from the industry. Wyoming does not levy a corporate income tax, so fantasy operators pay nothing to the state.