Arizona is moving to revoke Underdog’s daily fantasy sports licence, bringing prediction markets back into focus for US regulators. The issue was widely discussed at a four-day gaming conference in Puerto Rico, where lawmakers and regulators met to talk about sports betting and related products.

Chris Kotterman from the Arizona governor’s office spoke about the state’s violation notice against Underdog at the National Conference of Legislators from Gaming States in San Juan. He said the decision may have surprised many attendees, as it was likely the first time they had heard about it. The move has raised questions about how Arizona will apply its rules beyond traditional daily fantasy sports.

Prediction markets dominate conference debate

Prediction markets were a hot topic at the conference, just like at a similar event in Louisville earlier this year. Regulators and lawmakers debated whether these products should be treated like sports betting and how much control states should have.

The Arizona decision quickly caught attention online, sparking strong reactions on X, the platform formerly known as Twitter. Legal experts and industry figures showed there are different opinions on the issue. Andrew Kim, a gaming law lawyer in Washington DC, warned states to be careful. He said regulators have broad discretion in licensing decisions but could run into trouble if they try to police affairs in another jurisdiction.

Concerns over out-of-state conduct

The discussion also looked at whether actions in one state could affect licensing in another. Christopher Hebert, chairman of the Louisiana Gaming Control Board, said companies can only offer sports event contracts in Louisiana if they have a sports betting licence and meet all other rules. He declined to comment on whether prediction market issues in other states could affect reviews in Louisiana.

Victor Rocha, chairman of the Indian Gaming Association, defended Arizona’s move. He said he was amused by the faux outrage at the state, adding, “Why is (the) chattering class surprised? Were they not paying attention? Every legal, political and media tool will be used to go after prediction markets and the companies that ratline to the platform.”

Underdog responds and industry watches closely

Underdog is fighting Arizona’s move and said it will vigorously defend itself, claiming regulators are trying to supersede federal law. General counsel Nicholas Green said Underdog’s prediction market products are not available in Arizona and its deal with Crypto.com is unrelated to daily fantasy sports. The company plans to appeal.

Wall Street analysts think the case could have wider effects. Jordan Bender of Citizens said it is only a matter of time before Arizona acts against other operators. Officials said the notice is not final, and Underdog can keep operating while the appeal is underway.