North Carolina Sports Betting Suffers Loss

Prediction markets are officially infringing upon the North Carolina sports betting scene.

After hinting at the decision for the past month or so, Underdog is closing its sportsbook operations in The Tar Heel State. They will not, however, be leaving the North Carolina market entirely. On the contrary, this is part of the company’s shift towards sports prediction markets, which are inherently more friendly to operators due to looser regulation and compliance protocols.

There will be a push to write this off as an anomalous situation. Underdog’s sportsbook does not operate at the same scale as many other companies. North Carolina was, until now, the only state in which it was available.

At the same time, this decision follows another choice that could spell a larger trend. Underdog was due to expand beyond its sports betting operations in North Carolina by launching in Missouri on December 1. The company ended up scuttling those plans earlier this year, clarifying its intent to pivot into sports prediction markets. This is why many were bracing for, if not outright expecting, their North Carolina sports betting operations to close down.

More Details on Underdog Leaving the North Carolina Sports Betting Market

Here is Matthew Waters of Legal Sports Report with more on Underdog’s decision to close its North Carolina sports betting operations:

“Underdog is shutting down its sports betting operation in North Carolina next Wednesday, according to its website. The move follows Underdog’s decision not to launch legal sports betting in Missouri on Dec. 1, deciding instead to offer sports predictions in the state a few days before the market opened. Underdog will launch sports predictions to replace the sportsbook, the company confirmed. It currently offers predictions in 25 states.
“Underdog announced it launched sports predictions in 16 states with Crypto.com in early September, but never let on that it would be scrapping its sports betting plans. Less than a month later, the company announced it would launch sports betting in Missouri through a market access deal with the Kansas City Royals. Underdog also continued with the temporary licensing process in Missouri and was awarded a temporary license in late October, clearing it for a Dec. 1 launch.”

The speed at which Underdog has decided to pivot exclusively into sports prediction markets is catching many by surprise. Their decision to pass on launching services for sports betting in Missouri was the definition of a last-minute development. On top of that, Underdog was also licensed to provide sports betting in Ohio, yet opted against launching those services.

Will Underdog Closing Up Shop in North Carolina Spark a Larger Trend?

Anyone who follows the sports betting industry, be it as a consumer or analyst, knows by now that there’s no escaping the prediction-market discussion. It is everywhere. And while Underdog may be among the first companies to completely shudder sports betting operations in the United States in favor of prediction markets, they are far from the first big name to fire a warning shot at the general status of sports gambling.

Consider FanDuel and DraftKings, the two biggest sports betting sites in the United States. They are not, as of now, shutting down their North Carolina sports betting operations. But they have launched their own prediction market services in states that have yet to legalize sports betting.

It’s easy to interpret this as a temporary workaround. Some simply believe companies will seek legal sports betting licenses once other states begin to offer them. But there are benefits to prediction markets that could prompt the reverse trend.

For starters, because prediction markets are currently subject to federal regulation, states cannot determine their specific tax rates. That is a big deal when you consider some states tax sports betting companies at a clip north of 40 percent.

Heck, it’s even a big deal for the North Carolina sports betting market. Sportsbooks are presently taxed at an 18 percent rate in The Tar Heel State. Certain legislators were actually hoping to double that amount and bring it up to 36 percent. That measure received a ton of push-back from operators. And if it is revisited, you can’t help but wonder if active sportsbooks, like DraftKings and FanDuel, could follow Underdog’s lead.

The Sports Betting Industry Could be Headed for a Reckoning

Nobody quite knows how or whether sports prediction markets and legal sports betting services can coexist. Rest assured, though, nearly everyone agrees it’s an issue.

Legislation is already being taken by certain states against prediction-market operators. Beyond that, the NFL has already taken a stance against sports prediction markets during a recent congressional committee hearing. That in itself is a huge deal. The NFL clearly isn’t speaking on behalf of all sports betting operators, because some of them offer prediction markets. But the NFL’s own lucrative, deeply entrenched partnerships with sports betting properties renders their collective sentiments intriguing, if not a little confusion.

Chances of both industries working in perfect harmony feel slim. States will not want to relinquish oversight on sports betting—or, as prediction markets call them, “event-based contracts.” If we had to guess, they will provide plenty of push-back against prediction-market operators in the coming months and years.

It might be a stretch to say one of these industries will crumble beneath the weight and might of the other. At the same time, given how quickly prediction markets are spreading, maybe that’s not a stretch.

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