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Underdog Fantasy will pay a $17.5m fine to the state of New York and at least temporarily cease offering fantasy games in the state as part of a settlement announced Friday (March 14) with the New York State Gaming Commission.

The company began offering fantasy contests in New York in July 2020 without an interactive fantasy sports license, and then in December 2022 acquired Synkt Games, which did hold a temporary permit in the state.

The commission also found that even after acquiring Synkt, not all of Underdog's offerings met the standard of the temporary permit, despite what both sides called a good-faith belief that the contests were legal.

“Since December 22, 2022, Underdog Fantasy has been offering some [interactive fantasy sports] contests within the meaning of the terms and conditions set forth in a temporary permit the commission issued to Synkt and has been offering some IFS contests that are not within the meaning of the terms and conditions set forth in a temporary permit the commission issued to Synkt,” reads the settlement agreement between the two.

Despite that wording, the company said that was not related to the types of games the company offered, such as the controversial pick’em style games that some state regulators have taken issue with.

“It’s a unique, temporary license issue specific only to New York, and not related to any specific game format we offer,” said Nicholas Green, Underdog’s general counsel, in a statement. “Any fantasy game created after 2015, no matter the format, is not permitted under the commission’s interpretation of what games a temporary permitholder, like Underdog, can and cannot offer.

“The high fine amount speaks to the popularity of our games, as the settlement was calculated based on our revenue in New York,” Green added.

The company said in its statement that it expects its departure from the New York market will be temporary, as the company has an active application for permanent licensure, which it said the commission will review as part of the settlement. 

The state has yet to issue any permanent licenses to fantasy sports operators, instead allowing 12 operators, including FanDuel and DraftKings, to operate on temporary permits since 2016 due to the terms of state legislation and then a series of subsequent legal challenges regarding of the status of fantasy sports in New York.

“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. “We disagree with the commission, but the settlement does provide clarity on New York licensing issues. 

“The settlement recognizes that Underdog worked in cooperation with the commission and operated at all times in a good faith interpretation of state law,” he added. “We look forward to offering all of our contests again to New Yorkers, and we are working with the commission to do so as soon as possible.”

PrizePicks reached a similar settlement with the New York gaming regulators in February 2024, agreeing to pay almost $15m. The company has not offered pick’em-style fantasy games in the state since that settlement.

“This settlement is another example of the gaming commission looking out for the gaming public,” stated commission chair Brian O'Dwyer. “We encourage fantasy sports players to play only through permitted or registered operators that are subject to our comprehensive regulations that protect New Yorkers.”

Underdog also announced it will launch its peer-to-peer Pick'Em Champions product in New Jersey and Delaware later this month.