Underdog Ends Drafts in 7 States in Favor of Prediction Markets: A Comprehensive Guide
Underdog Ends Drafts in 7 States in Favor of Prediction Markets: A Comprehensive Guide
Overview: A Major Shift in the Fantasy Sports Landscape
Underdog, a prominent player in the fantasy sports and prediction market industry, has announced a significant strategic pivot. The company is shutting down its popular “Drafts” fantasy sports product in seven U.S. states, prioritizing its prediction markets business instead. This decision comes amid ongoing legal and regulatory challenges surrounding the status of prediction markets in certain jurisdictions.
Company founder and CEO Jeremy Levine described the development as “not fun news” for the affected user base, acknowledging the disappointment this move will cause among dedicated Drafts players.
The Announcement: What Underdog Is Doing and Why
Drafts Shutdown Details
Underdog will cease offering Drafts at the start of the upcoming NFL season. Key points from the announcement:
- All submitted drafts will be settled — players will receive any winnings they are owed from existing entries.
- No new drafts can be entered in the affected states after the shutdown takes effect.
- The decision affects players in seven states.
Levine expressed regret over the necessity of the move, stating: “It sucks. I love Drafts. It was the first game we ever launched and a big part of what built Underdog. Even though they don’t get anywhere near the usage of our other offerings, we still care deeply about them. And it pains me that we can’t do right by the Drafts community and offer the best experience possible to the most customers.”
The Seven Affected States
The following states will lose access to Underdog’s Drafts product:
| State | Region |
|---|---|
| Massachusetts | Northeast |
| Maryland | Mid-Atlantic |
| Michigan | Midwest |
| Mississippi | South |
| New Jersey | Northeast |
| Pennsylvania | Mid-Atlantic |
| Ohio | Midwest |
Players residing in these states will no longer be able to participate in new drafts, though existing entries will be honored.
Understanding the Conflict: Fantasy Sports vs. CFTC-Regulated Products
The Core Regulatory Issue
Levine explained the underlying reason for the shutdown: companies that offer products regulated by the Commodity Futures Trading Commission (CFTC) — such as prediction markets — are prohibited from also offering fantasy sports in these seven states. This regulatory restriction forced Underdog to make a difficult choice.
Why These Seven States?
The affected states have specific laws or regulatory interpretations that create an incompatibility between CFTC-regulated products and fantasy sports offerings. While the company did not elaborate on each state’s individual regulations, the pattern suggests these jurisdictions have adopted stricter separation requirements than other states where Underdog continues to operate both product types.
The Choice Underdog Faced
According to Levine, Underdog had two options:
- Keep Drafts operating in the seven states by giving up its prediction markets business entirely in those jurisdictions.
- Shut down Drafts in those states and continue offering prediction markets.
The company chose the latter, prioritizing its prediction markets division.
The Rise of Prediction Markets and Underdog’s Strategic Shift
What Are Prediction Markets?
Prediction markets are financial markets where participants trade contracts based on the outcome of future events — from election results to sports championships to economic indicators. Unlike traditional fantasy sports, which focus on player statistics and team performance, prediction markets allow users to speculate on a broader range of real-world outcomes.
These markets are regulated by the CFTC, which oversees commodity futures and options trading in the United States.
Underdog’s Investment in Prediction Markets
Earlier this year, Underdog made a significant move into this space by acquiring:
- Aristotle Exchange DCM (Designated Contract Market)
- Aristotle Exchange DCO (Derivatives Clearing Organization)
These acquisitions gave Underdog the regulatory infrastructure to operate compliant prediction markets, positioning the company as a major player in this emerging sector.
Why Prediction Markets Won Out
Levine indicated that prediction markets have become an increasingly important part of Underdog’s business strategy. The company’s leadership believes this sector offers greater long-term growth potential than traditional fantasy sports offerings.
This decision reflects a broader industry trend, where several major operators are pivoting toward prediction markets as regulatory frameworks evolve and user demand shifts.
The Future of Drafts: Hope for a Comeback?
Levine’s Teaser
Despite the current shutdown, Levine offered a note of cautious optimism for Drafts fans. He revealed that his team “has some ideas” about how to bring Drafts back to more customers in the future. However, he tempered expectations by noting it is “too early to commit to anything yet.”
“I’m optimistic, and we’re definitely going to try. But until then, I don’t think there’s really anything I can say other than I’m sorry,” Levine said.
Potential Paths to Return
Industry observers speculate that possible avenues for Drafts’ return could include:
- Regulatory changes — If the affected states adjust their laws to allow coexistence of fantasy sports and prediction markets.
- Product restructuring — Underdog could redesign Drafts to fall outside the regulatory restrictions.
- State-by-state negotiations — The company might seek exemptions or clarifications from individual state regulators.
For now, however, Drafts remains unavailable in the seven listed states, with no concrete timeline for reinstatement.
Industry Context: The Broader Battle Over Prediction Markets
The Growing Regulatory Conflict
Underdog’s decision is just one example of the ongoing tension between:
- State-level regulators, many of whom classify fantasy sports as gambling and subject it to strict oversight.
- Federal regulators like the CFTC, which oversee prediction markets as financial instruments.
- Companies trying to navigate overlapping and sometimes contradictory legal frameworks.
Other Companies Facing Similar Challenges
Underdog is not alone in confronting these issues. Several other fantasy sports and prediction market operators have faced:
- Cease-and-desist orders from state regulators.
- Legal challenges over whether prediction markets constitute illegal gambling.
- Debates over how to classify event-based trading for regulatory purposes.
The outcome of these battles could shape the entire industry’s future.
What This Means for Players and the Industry
Impact on Affected Users
For players in the seven states, the immediate impact is clear:
- No new Drafts entries can be created.
- Existing entries will be settled normally.
- Players may need to explore alternative fantasy sports platforms that still operate in their state — though those platforms may face similar regulatory pressures over time.
Broader Industry Implications
Underdog’s choice to prioritize prediction markets sends a signal to the rest of the industry:
- Prediction markets are viewed as a growth area with higher revenue potential and regulatory clarity at the federal level.
- Traditional fantasy sports may face ongoing headwinds in states with restrictive laws.
- Consolidation between fantasy sports and prediction market operators could accelerate as companies seek to build compliant, multi-product platforms.
Conclusion: A Difficult But Directional Decision
Underdog’s shutdown of Drafts in seven states represents a strategic realignment rather than a retreat. While painful for the affected community, the company’s leadership believes this move positions Underdog for long-term success in the prediction markets space.
Whether Drafts eventually returns remains uncertain, but Levine’s comments suggest the company is not abandoning the product entirely. For now, players in Massachusetts, Maryland, Michigan, Mississippi, New Jersey, Pennsylvania, and Ohio will need to look elsewhere for their fantasy sports fix — or explore Underdog’s prediction market offerings instead.
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