Underdog Fantasy made a shift Wednesday in California, opting to focus on peer-to-peer daily fantasy sports (DFS) in the state going forward. Coinciding with that, the company is pulling it’s Pick’em-style games, which the state attorney general on July 3 wrote he believes are illegal under existing law. The AG’s opinion, which also points to draft-style games that require entry fees being illegal, is a non-binding and advisory.
Underdog’s Champions contests went live in the state shortly after 2 p.m. local time Wednesday. Per the Underdog website, “Champions is a peer-to-peer fantasy sports contest in which participants create a roster of 2-8 athletes.” Players pay an entry fee and compete against one another, earning points, and the player with the most points wins.
“We brought the peer-to-peer Pick’em game type to the industry, and have now launched our Champions game in 20 states,” an Underdog spokesperson told InGame. “We expect California fans will love playing, which is what we have seen in every other state.”
PrizePicks, Underdog’s main competitor, made a similar move July 2, launching its Arena game ahead of the attorney general’s opinion being released. The difference between Pick’em-style and peer-to-peer games is that in Pick’em contests, users are playing against the house. In peer-to-peer games, users compete against each other, while the operator takes an entry fee or rake.
Attorney General Rob Bonta’s office wrote in its opinion that it views draft-style games, in which players pay an entry fee, as illegal because the entry fee is tantamount to a “bet or wager.”
“We conclude that draft style games also involve betting on sports under section 337a(a)(6),” the AG’s office wrote. “The game entry fees satisfy the definition of a ‘bet’ or ‘wager’ because players ‘promise to give money’ based on ‘the determination of an uncertain or unascertained event’ (the sports competitions) ‘in a particular way’ (the relative aggregate performance of each player’s selected team of athletes).”
Underdog coming halfway?
In recent years, DFS companies have gotten heightened pushback on their pick’em-style games, which regulators and lawmakers in some states have deemed a close enough approximation to sports betting to ban them. While PrizePicks announced its change before the AG’s opinion, it continues to offer a contest that the attorney general would consider not legal.
That Underdog is making the change after the opinion was released could be seen as a concession or a suggestion to compromise. DFS companies were surprised at how comprehensive the Bonta opinion is, as many expected he would point to pick’em-style contests as being illegal in his eyes, and potentially not even address draft-style or peer-to-peer games.
Hours after the opinion was released July 3, California Gov. Gavin Newsom voiced his disagreement, his office quoted on X saying, “While the Governor does not agree with the outcome, he welcomes a constructive path forward in collaboration with all stakeholders.”
The status of DFS in California has been under a microscope for some time. The request for the AG’s opinion is 18 months old, and tribes in the state are eager for the AG to take enforcement action against them. Indian Country says that DFS cuts into its exclusivity for gambling in the state. No form of digital gambling is currently explicitly legal in California.
