Crypto.com Stops Offering Sports Event Contracts in Arizona, Eight Other States

Crypto.com has withdrawn its sports event contracts and prediction market offerings from Arizona and eight other U.S. states, extending a state-by-state pullback that began earlier this year in Nevada.

In addition to Arizona, the company withdrew from Michigan, Maryland, Massachusetts, Illinois, New Jersey, Nevada, and Ohio. Crypto.com does not offer sports event contracts in New York and has not operated prediction markets in the state.

Sports Betting Dime was the first to report the latest exits. The news outlet also broke the news on Arizona’s plans to revoke Underdog Fantasy’s daily fantasy sports (DFS) license due to its partnership with Crypto.com.

Nevada Marked First Major Exit

Nevada was the first state where Crypto.com formally halted offering sports event contracts on November 3. The move came after regulators moved to block the product. They argued that event contracts on sporting outcomes constituted unlawful sports wagering.

The regulators’ move followed a denial by a U.S. district judge to Crypto.com’s request for a preliminary injunction against the state in October. The judge concluded that contracts tied to the outcomes of sports events fall within the scope of state laws governing wagering.

States Involved in Litigation Against Prediction Markets

Notably, all of the states where Crypto.com no longer offers sports event contracts are either involved in litigation against prediction markets or have issued cease-and-desist letters to such platforms.

Connecticut presents a partial exception. The state issued a cease-and-desist letter to Crypto.com, as well as to Kalshi and Robinhood. Crypto.com has thus far chosen not to exit the state, while Kalshi responded by filing a lawsuit.

At the center of the disputes is the question of who regulates sports event contracts. Prediction markets fall under the oversight of the Commodity Futures Trading Commission. Because of that, operators like Crypto.com believe they don’t have to follow states’ gambling laws.

In the other corner, state regulators have repeatedly argued that prediction markets offering sports outcomes function as unlicensed sportsbooks, regardless of their federal commodities registration.

This legal conflict — federal derivatives law versus state gambling authority — is likely to spread to more states. Many industry observers expect that the issue could ultimately reach the U.S. Supreme Court.

What About Crypto.com’s Partnerships?

Some might be wondering about the effects on Crypto.com’s partners after the exits from the nine states. In addition to Underdog, the company has partnered with Fanatics Markets, which formally launched on December 3.

Notably, neither Underdog nor Fanatics operates sports event contracts in any of these states. However, Arizona’s move to revoke Underdog’s DFS license could be a warning of things to come.

Fanatics operates a licensed sportsbook in Arizona. Its involvement with prediction markets could, in theory, place that license at risk, similar to the enforcement action facing Underdog.

Aside from Arizona, eight other states have issued warnings to licensed operators that involvement with prediction markets could result in revocation of their licenses. We are yet to see which, if any, would follow Arizona.