The Arkansas Department of Finance and Administration (DFA) sent cease-and-desist letters Thursday to Underdog and PrizePicks for offering unlicensed sports betting in Arkansas.
The DFA claims the two daily fantasy sports operators are in violation of Amendment 100 to the Arkansas Constitution.
DFA regulatory administrator Trent Minner said the DFA is putting these companies on notice that Arkansas is not wide open like the places “back in the day” that tolerated illegal gambling.
“The Internet is today’s equivalent of a ‘wide open town’ where unlicensed gambling thrives outside of the taxation and age-verification requirements required by the law,” Minner said.
The DFA asserts that these operators have offered player prop bets and thus no longer fall under the traditional fantasy sports concept which operates legally under the protection of Act 1075 of the 2017 Regular Session. Arkansas law does not allow DFS operators to offer unlicensed sports betting though, and the state considers the “Pick ‘Em” contests popularized by Underdog and Prize Picks to be sports betting products and not DFS products.
The tax rates for online sportsbooks in Arkansas are much steeper than those paid by DFS companies. Online sports betting sites have to pay a 13% tax on their first $150 million in revenue and then a 20% rate on any additional proceeds thereafter, while DFS operators only pay an 8% tax rate.
The legal age to use these two products differs as well, with 18 being the legal age to use daily fantasy sports apps and 21 being the entry point to legal sports betting in Arkansas.
“Arkansas law requires sports bets to be placed with a licensed sportsbook that is required to verify the age of the consumer. The state has an interest in protecting Arkansas children from operators seeking to exploit underage Arkansans,” added DFA secretary Jim Hudson.
A growing problem for DFS sites
These DFS operators are in hot water in a number of other states on top of their troubles in Arkansas.
The Florida Gaming Control Commission sent a second round of cease-and-desist letters to Underdog, PrizePicks, and Betr on Jan. 31, a follow-up to initial cease-and-desist notices sent on Sept. 19, 2023, according to Casino.org.
The letter demands that the companies discontinue all contests and promotions “offering or accepting illegal bets or wagers” within 30 days.
The Kansas Racing and Gaming Commission also confirmed that six cease-and-desist letters were sent out to various parties who may be in violation of Kansas law.
Underdog had pulled its "Pick'em” games from Kansas in November, but PrizePicks is still live in the state.
PrizePicks pauses in New York
PrizePicks also announced Monday that it will stop operating Pick'Em contests due to licensing rules changes made by the New York Gaming Commission.
Regulators contended that PrizePicks “has not been, and is not authorized to offer IFS [interactive fantasy sports] in New York pursuant to Article 14 of the Racing Law.”
PrizePicks also reportedly reached a $15 million settlement with the New York Gaming Commission after regulators said the DFS site was operating illegally within the massive New York sports betting market. Although the company argued it operated in a “good-faith belief” that it could do so in the Empire State, regulators disagreed, according to a report obtained by ESPN.
The ruling does not bar PrizePicks from receiving a license to operate legally in the Empire State.
“We are in the process of applying for a permanent license to operate in New York under the state’s new rule," the company said in a letter to customers. "We look forward to resuming paid contests in New York as soon as possible.”
PrizePicks will offer free-entry contests with cash prizes for New York customers in the meantime, similar to what it did in Michigan in the fall after Michigan’s Gaming Control Board put in place new administrative rules for fantasy sports.
