Underdog Sports is giving up its daily fantasy sports licenses in seven states and has sued five states in federal court, betting its future on the prediction markets business it built after winning approval from the Commodity Futures Trading Commission.
Founder and CEO Jeremy Levine announced the fantasy sports withdrawal in a post on X on September 5, according to NEXT.io. Underdog will shut down its “Drafts” fantasy product in Massachusetts, Maryland, Michigan, Mississippi, New Jersey, Pennsylvania and Ohio, effective right after the first game of the 2026 NFL season. Contests already entered in those states will play out normally, but no new drafts will be accepted.
Levine said regulators in those seven states told Underdog it could not simultaneously hold a fantasy sports license and offer its CFTC-approved prediction market product. Rather than pull back on prediction markets, the company chose to drop fantasy sports.
“Those states have taken a legal viewpoint we disagree with, so we had to choose. We could keep our fantasy licences in those states, or surrender the licenses and offer effectively our full experience, minus Drafts,” Levine said.
Levine called the decision painful given that Drafts was Underdog’s first product when it launched in 2020, even though he said the game draws far less usage than the company’s other offerings. He said Underdog is exploring ways to bring Drafts back to affected customers but described any solution as too early to commit to.
Federal lawsuits filed against five states
Underdog followed the fantasy sports pullback with a more aggressive legal move, according to SBC Americas. The company sued five states in federal court during the week of September 8, seeking injunctions to preemptively block those states from moving to shut down its sports prediction markets business. SBC Americas reports the filings came in the days after Underdog surrendered its DFS licenses in the seven states, framing the litigation as part of the same strategic pivot toward prediction markets.
The lawsuits mark an escalation from Underdog’s earlier posture of complying with state demands. Rather than simply choosing between products state by state, the company is now asking federal courts to weigh in directly on whether states can restrict a CFTC-regulated prediction market offering.
Pattern of prioritizing prediction markets
This is not the first time Underdog has favored its newer product line over legacy offerings. NEXT.io notes the company shut down its sportsbook in North Carolina in December of last year as it narrowed its focus toward fantasy sports and prediction markets. With Drafts now being wound down in seven states and litigation underway in five more, Underdog’s core fantasy business has been reduced to a smaller footprint than at any point since its 2020 launch, even as its prediction markets arm expands under federal, rather than state, oversight.
