Underdog Fantasy is packing up and leaving New York, and it is costing the company $17.5 million on the way out.
The daily fantasy sports operator reached a settlement with the New York State Gaming Commission on Friday, agreeing to withdraw all contests from the state and pay a fine tied to revenue generated from its games. The commission had determined that Underdog had been offering DFS contests outside the scope of its temporary license, though the company maintains it operated in good faith under state law.
Underdog will launch its peer-to-peer pick’em fantasy product in New Jersey and Delaware later this month, the company also announced on Friday. It has also applied for a permanent fantasy license in New York, signaling it’s not necessarily gone for good.
Temporary license did not cover all games
The dispute stems from Underdog’s acquisition of Synkt Games in December 2022. With that purchase, Underdog inherited Synkt’s temporary interactive fantasy sports (IFS) license, issued in 2016. But according to regulators, that license didn’t cover the type of games Underdog went on to offer in New York.
The commission determined that any fantasy games introduced after 2015 were not permitted under the temporary framework. Because Underdog’s “Pick’em” and “Draft” contests didn’t exist when Synkt originally secured its license, the commission ruled them unauthorized.
“It’s a unique, temporary license issue specific only to New York and not related to any specific game format we offer,” Underdog general counsel Nicholas Green said in a statement. “Any fantasy game created after 2015, no matter the format, is not permitted under the commission’s interpretation.”
The result: a $17.5 million fine, calculated based on Underdog’s New York revenue, and the company pulling its games from the state effective immediately. Fellow pick’em DFS operator PrizePicks paid a similar fine last year, though it operated without any type of license.
Regulatory turbulence in New York DFS
New York has been a thorny landscape for DFS operators. The state formally legalized and regulated daily fantasy sports in 2016, but court battles delayed full implementation until 2021. Even now, permanent licensing has yet to begin. Instead, DFS companies operate under temporary permits, which the state can revoke at any time.
Green pointed to the broader uncertainty around fantasy regulation in New York, calling the state’s process “unclear” and arguing that consumers have been left with limited DFS options.
“For nearly a decade, fantasy sports in New York has operated in regulatory uncertainty, including licensing delays limiting consumers’ choices to only a couple of legacy operators,” Green said.
Despite its exit, Underdog has filed for a permanent fantasy sports license in New York. The settlement does not prevent the company from returning, and regulators acknowledged Underdog cooperated with the investigation and acted in good faith.
Underdog to launch in New Jersey, Delaware
Underdog isn’t dwelling on its New York departure for long. The company is launching its “Pick’em Champions” contests in New Jersey and Delaware later this month, expanding its footprint in states with more established fantasy and sports gaming regulations.
That will bring Underdog’s DFS offerings to 36 states, alongside its licensed sports betting business in North Carolina.
The regulatory scrutiny in New York highlights the growing debate over what constitutes fantasy sports versus sports betting. The state formally banned DFS contests that “mimic proposition betting” last year, though the commission’s case against Underdog centered on licensing, not game mechanics.
Meanwhile, legislation that could broaden the definition of DFS in New York remains stalled. State Sen. Joseph Addabbo has twice introduced a bill aimed at expanding the legal scope of fantasy sports contests, but it has yet to gain traction.
