ADG Issues Warning to Operators with Prediction Market Ties

Similar to the Ohio Casino Control Commission, at the end of August, Arizona’s gambling regulator has put licensed operators on notice, informing them of the perils of choosing to dabble in prediction markets, even outside state lines, in relation to their ability to do business in the state.

ADG Stands Firm 

The Arizona Department of Gaming (ADG) issued the warning this week in a letter obtained by InGame. Director Jackie Johnson took the opportunity to tell operators that having ties to companies selling event contracts might affect their standing in the state. 

“I write now to make certain that you are aware of the State of Arizona’s standpoint. Offering or selling event contracts to persons located within Arizona without a license from the Department violates Arizona law.”, said the letter after referencing a previous letter from June sent on behalf of the department to “Event Wagering Operators, including Designees and Management Services Providers”.

If the ADG deems a licensed entity has “partnered with a company that is selling event contracts in a jurisdiction outside Arizona in violation of the laws of that jurisdiction, that might (depending on circumstances) impact a licensing decision,” Johnson clarified. 

The letter also stressed that relationships with designated contract markets, futures commission merchants, or similar entities, even outside state lines, will be closely scrutinized.

The caution comes amid a growing number of gambling and fantasy sports companies that are considering expanding into prediction markets. While Arizona is one of the nation’s largest regulated betting states, it has made clear that operators are not to test the waters in other jurisdictions without possibly risking their licenses at home.

Burning Matter

Earlier this year, ADG sent cease-and-desist notices to Kalshi, Robinhood, and Crypto.com for operating sports betting products without proper authorization. Regulators issued similar warnings in at least six other states. No lawsuits have yet emerged in Arizona over prediction markets.

Still, the issue is pressing, as Arizona-licensed Underdog Fantasy recently rolled out event contracts in 16 other states by partnering as a “tech provider” with Crypto.com. No other major sportsbook or fantasy operator has launched prediction markets, but FanDuel has announced plans to work with CME Group on a product limited to financial contracts.

With prediction markets promising to reach into all 50 states, including places like California and Texas, where sports betting remains illegal, Arizona operators are put in a difficult position. However, Arizona’s thriving regulated market might prove to be too valuable to risk.