Underdog Shuts Down Fantasy Sports in Seven States: A Strategic Pivot Toward Prediction Markets
Underdog Shuts Down Fantasy Sports in Seven States: A Strategic Pivot Toward Prediction Markets
Overview: What Happened and Why It Matters
In early September 2026, US-based sports gaming firm Underdog announced it would voluntarily surrender its fantasy sports licenses in seven states—Maryland, Massachusetts, Michigan, Mississippi, New Jersey, Ohio, and Pennsylvania. The move effectively ends the company’s popular “Drafts” fantasy product in those jurisdictions starting September 10, 2026. Underdog’s decision comes as regulators in those states determined that operating a prediction market platform alongside a traditional daily fantasy sports (DFS) offering is legally incompatible under current state laws.
This shift signals a broader strategic realignment for Underdog, which has increasingly prioritized its prediction market operations over its original fantasy sports business. Founder and CEO Jeremy Levine has publicly expressed disagreement with the regulators’ interpretation but acknowledged that the company must choose: retain fantasy licenses in those states and curtail prediction products, or surrender fantasy licenses and offer a full prediction experience.
The Regulatory Conflict: Why States See Incompatibility
The Core Legal Issue
Prediction markets—platforms where users trade contracts based on the outcome of real-world events (sports, politics, entertainment)—are regulated in the US by the Commodity Futures Trading Commission (CFTC). Underdog obtained a CFTC license in 2025 to operate such markets, initially through a partnership with Crypto.com. By contrast, daily fantasy sports are governed by state-specific laws, often classified as “games of skill” exempt from traditional gambling regulations.
The crux of the conflict: several state regulators have taken the position that a single company cannot hold both a CFTC-regulated prediction market license and a state-issued fantasy sports license simultaneously. They argue that allowing both under one roof blurs the line between skill-based contests and financial derivatives, potentially exposing consumers to regulatory gaps. Underdog disagrees, calling the legal viewpoint “incorrect,” but has chosen to comply by surrendering the state licenses rather than halting its prediction operations.
Which States Are Affected?
The seven states where Drafts will shut down are:
| State | Key Regulatory Body | Notable Context |
|---|---|---|
| Massachusetts | Massachusetts Gaming Commission | One of the most restrictive states for sports wagering and DFS |
| Maryland | Maryland Lottery and Gaming Control Agency | Recently expanded gaming, but cautious on new formats |
| Michigan | Michigan Gaming Control Board | Active in both DFS and sports betting, with strict licensing |
| Mississippi | Mississippi Gaming Commission | Traditional gambling state; less open to novel products |
| New Jersey | New Jersey Division of Gaming Enforcement | Often a pioneer in gaming regulation, but holds firm on separation |
| Ohio | Ohio Casino Control Commission | Relatively new sports betting market, with conservative rulings |
| Pennsylvania | Pennsylvania Gaming Control Board | One of the largest regulated gaming states; strict compliance |
All seven states have either publicly stated or signaled through actions that a combined CFTC/DFS license is unacceptable.
CEO Jeremy Levine’s Apology and Explanation
In a candid post on X (formerly Twitter), Levine addressed the Drafts community directly. “Right after kickoff on Wednesday, we will be shutting down Drafts in seven states,” he wrote. “Already entered drafts will continue as normal, but in those states you won’t be able to enter new drafts.”
He acknowledged the frustration, calling the situation “sucky” and explaining the binary choice the company faced: “We could keep our fantasy licenses in those states, or surrender the licenses and offer effectively our full experience, minus Drafts.” He reiterated that Underdog’s prediction products—licensed by the CFTC—remain available in all 50 states (subject to federal restrictions), while Drafts will continue in the other 33 US states plus Canada (outside Ontario).
Levine also expressed personal attachment to Drafts, noting it was “the first game we ever launched and a big part of what built Underdog.” Despite lower usage compared to other offerings, he said the team “care[s] deeply” about the product and is exploring ways to restore it to affected users, though he cautioned “it’s too early to commit to anything yet.”
Customer Backlash and Defense
Some users criticized the move, arguing that the fantasy element was what differentiated Underdog from rivals like DraftKings or FanDuel. Levine’s response hinted at a calculated trade-off: prediction markets represent what he called “one of the most exciting developments we’ve seen in a long time,” and the company is betting that long-term growth lies there.
Prediction Markets vs. Daily Fantasy Sports: The Shifting Priority
Underdog’s Prediction Market Launch
Underdog first entered prediction markets in September 2025 via a partnership with Crypto.com. The platform allows users to trade event contracts—for example, “Will Team A score more than 100 points?”—with real-money stakes, similar to financial derivatives. Levine described the space as a “once-in-a-generation opportunity.”
Since then, the company has steadily shifted resources toward its prediction infrastructure. While fantasy sports remain available in 33 states, the decision to surrender licenses in seven states suggests that management views predictions as the core long-term product. The CEO has previously fired competitive shots, claiming rivals are “scared that we will challenge their market positions.”
Why Predictions Are Growing
- Higher potential margins: Prediction markets rely on continuous trading volume, whereas DFS requires new contests to be created and filled.
- National reach: CFTC licensing allows Underdog to offer prediction products in all 50 states (where not otherwise restricted), bypassing state-by-state fantasy hurdles.
- Younger user base: Over 60% of Underdog’s monthly active users are under 30—a demographic that trends toward event-based trading and crypto-native products.
- Regulatory tailwinds: Other countries (e.g., the UK) are reconsidering their stance on prediction markets, potentially opening larger markets.
The IG Group Acquisition: A $1.1 Billion Bet on Prediction Markets
Understanding the Deal
In late July 2026, UK-based FTSE 100 fintech IG Group agreed to acquire Underdog for $1.1 billion. IG Group, best known for CFDs and spread betting, views Underdog’s “valuable licence stack” as a key asset. The company’s CEO, Breon Corcoran, stated at the time of the announcement: “Underdog puts us at the front of that convergence: a product-first team, a leading daily fantasy sports franchise and a full licence stack that together give us a differentiated position in US prediction markets.”
Notably, over 60% of Underdog’s monthly active users are under 30, while IG Group’s average customer age is 42. The acquisition thus offers IG a direct pipeline to a younger, digitally-native audience—one that aligns closely with prediction market behavior.
UK Regulatory Hurdles and Opportunities
No prediction market platform currently holds a license from the UK Gambling Commission. The Commission has stated that prediction markets must be regulated as gambling, just like sportsbooks or casinos. Many prediction firms resist this classification, arguing their products are closer to financial instruments.
However, the UK’s Financial Conduct Authority (FCA) is currently reassessing consumer access to investment products, including a possible review of the retail binary options ban. If the FCA opens the door to prediction markets under financial regulation (rather than gambling), it could create a new regulatory pathway. Underdog, via IG Group, would be well-positioned to enter the UK market—further tilting the company’s focus away from DFS.
Interestingly, Jason Trost, CEO of UK-licensed betting exchange Smarkets, argues that prediction platforms and exchanges are essentially the same product. This perspective could influence UK regulators as they shape future policy.
What This Means for Underdog Users
Immediate Impacts
- Drafts ceases in 7 states: No new drafts can be entered after September 10, 2026. Existing drafts already entered will be completed normally.
- Other Underdog products remain: Prediction markets, pick’em games, and other non-draft offerings continue in all 50 states (subject to CFTC rules).
- No refund impact: Users with existing balances can still use them for prediction trades.
Future Possibilities
Levine promised to explore ways to return Drafts to affected customers, possibly through technical workarounds or license reacquisitions if state laws change. Underdog’s continued fantasy presence in 33 states plus non-Ontario Canada means the company is not abandoning DFS entirely, but the center of gravity has clearly shifted.
Conclusion: A Defining Moment for the Industry
Underdog’s decision to sacrifice fantasy licenses in seven states—states that collectively represent a significant share of US sports wagering revenue—marks a watershed moment. It signals that prediction markets are no longer an experimental side project but the company’s primary strategic focus. The IG Group acquisition provides both capital and international reach, while potential UK deregulation could open new frontiers.
For users and competitors, the message is clear: Underdog is betting big on predictions. Whether this gamble pays off will depend on regulatory developments, user adoption, and the continued evolution of this hybrid financial-gaming space.
Want to learn more about prediction markets?
The Global Prediction Market Forum will be held in Lisbon on 1 October 2026. Visit sbcevents.com/global-prediction-markets-forum for details.
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