Underdog lays off employees as it expands into prediction markets

Charlotte Capewell

5 March 2026 at 7:16am UTC-5

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Daily fantasy sports operator Underdog Fantasy has laid off at least 125 employees, which is more than 20% of its workforce, as it shifts its business strategy toward prediction markets and AI.

The layoffs, which happened on February 27, mark one of the company’s most significant restructurings since its rapid expansion in the US fantasy sports and betting industry.

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Since its launch in 2020, Underdog has expanded into offering fantasy games in 40 states and a sportsbook in North Carolina.

The company will now shift toward prediction market platforms, which have been growing in popularity nationwide. In September, Underdog partnered with derivatives exchange Crypto.com to launch sports event contracts in 16 states.

Underdog Chief Executive and founder Jeremy Levine told Front Office Sports the layoffs came as the business transitioned from a state-by-state framework to “a national prediction markets platform with seamless offerings across the country.”

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Eight former employees also spoke to Front Office Sports, adding that although Levine “appeared upset” when talking about the layoffs, AI had played a role in the decision.

“They were pushing AI heavily in previous company all-hands meetings,” one employee told the media outlet, adding that employees were “encouraged” to use AI, such as ChatGPT and Claude, as part of their jobs.

The cuts affected multiple departments, including customer support, marketing, design, and the company’s fantasy “drafts” product line. Notably, around two-thirds of Underdog’s fraud operations team were also laid off.

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The Backstory

Why the company is cutting now

Underdog’s layoffs land at a pivot point for the fantasy sports operator as it recasts itself around prediction markets and automation. The company, which has grown quickly since its 2020 launch, is moving away from a state-by-state model built on daily fantasy and into a national framework that treats sports outcomes more like tradable contracts than traditional bets. That shift helps explain why roles across customer support, marketing, design and fraud operations would be restructured in one sweep. The company has said artificial intelligence will underpin more of its workflow and product experience, a change that often compresses headcount in back-office and service functions while concentrating investment in engineering and market infrastructure.

The broader logic: prediction markets promise liquidity across jurisdictions, smoother onboarding and a product that can scale beyond the patchwork rules of sports wagering. Building that requires different capabilities than operating a drafts-centric fantasy business, and it pressures operators to standardize compliance, risk controls and customer protections at a national level. That is the context for the cuts and for Underdog’s recent dealmaking and staffing choices.

A turn toward event contracts

The turning point arrived with Underdog’s partnership with Crypto.com’s derivatives unit to offer sports event contracts in 16 states. In September, the companies announced that Underdog would host Crypto.com Derivatives North America’s contracts on its platform, blending financial-style pricing with sports outcomes. Instead of bookmaker odds, users buy and sell contracts whose prices move with market sentiment. The collaboration leans on a Commodity Futures Trading Commission registration on the Crypto.com derivatives side, opening doors in states where traditional sportsbooks cannot operate.

Underdog’s pitch is that sports will be the center of prediction markets and that its audience, product and data give it an edge. Analysts are watching the category closely. Early estimates cited in coverage of the launch suggested hundreds of millions in potential revenue this year as liquidity grows and more retail platforms plug into event contracts. The partnership also hands Underdog a technology backbone suited to national scale, aligning with its push to deliver a uniform product regardless of state boundaries.

New leaders for a new model

Underdog paired the product shift with leadership additions and fresh capital. Shortly after unveiling event contracts, the company named Rishi Garg as chief financial officer and Kimberly Pointer Corbett as chief marketing officer, hires meant to steer financial strategy and brand growth as the business diversified. The company said it was on pace for nearly $500 million in year-five revenue and disclosed a $70 million Series C round led by Spark Capital that pushed its valuation above $1.3 billion.

Taken together, the funding and leadership moves positioned Underdog to finance a multi-year buildout of prediction markets while sharpening its go-to-market engine. The CFO appointment signaled a focus on capital allocation and regulatory navigation, both crucial in a model that spans commodities-style oversight and gaming rules. The CMO hire aligned with the need to educate users on a product that behaves more like trading than traditional parlays, and to defend share as rivals copy the playbook.

Compliance posture under scrutiny

As the business shifts, Underdog has moved to shore up responsible gaming practices and prepare frontline teams for new risks tied to market-style products. The company enlisted EPIC Global Solutions to deliver focused training and workshops for customer-facing staff, emphasizing early detection of harmful behaviors and better communication with at-risk players. For a platform that aims to bring in users from states without legal sportsbooks, trust and safeguards are central to winning regulator confidence and avoiding enforcement surprises.

Prediction markets blur lines for consumers who may view them as investments rather than wagers. That puts a premium on disclosures, spend controls and cross-functional monitoring that spans financial compliance and responsible gaming. Underdog’s partnership with EPIC indicates it understands the reputational and regulatory stakes as it scales a product that invites smaller, more frequent transactions and faster feedback loops than classic fantasy contests.

Legal fights shape the runway

The company’s legal exposure remains a swing factor, particularly in states debating the status of daily fantasy and adjacent products. In California, Underdog sued Attorney General Rob Bonta to block a pending opinion that could have imperiled fantasy offerings statewide. The complaint, filed in Sacramento County Superior Court and detailed in coverage of the lawsuit, argues the AG would be overstepping by making factual determinations about game skill elements through an opinion process. Underdog framed the issue as similar to disputes in New York and Illinois, where the industry ultimately prevailed after initial adverse views from attorneys general.

Why it matters for prediction markets: even as event contracts rely on a different regulatory chassis than fantasy, any blanket hostility toward sports-adjacent games can spill into policymaking and enforcement. California’s user base is large, and negative momentum there could slow investment or complicate messaging as Underdog courts new customers in non-sportsbook states. Conversely, clarity that preserves fantasy could ease the path for adjacent products, especially if operators emphasize consumer protections and economic benefits.

Rivals crowd into the lane

Competitive pressure is rising as major brands chase the same addressable market. Fanatics said it would launch a predictions app through a Crypto.com partnership, confirming a strategy similar to Underdog’s just weeks after the derivatives tie-up went public. The company’s chief executive told CNBC the product would arrive within weeks, as reported in coverage of Fanatics’ plans. DraftKings and FanDuel have also repositioned to focus on prediction markets, reflecting a belief that this model can reach consumers in states that ban or limit sportsbooks.

The fast-follower dynamic raises the bar on liquidity, pricing sophistication and user education. It could also compress margins if incentives escalate to win market share. For Underdog, that makes differentiation through product execution, responsible gaming and legal preparedness more urgent, as rivals with bigger balance sheets imitate the event-contract template and flood the market with promotions.

The upshot: the layoffs underscore a bet that a leaner, tech-heavy organization can build and defend a national prediction market product faster than a legacy fantasy operator. The next tests will come from regulatory clarity, user adoption beyond core fantasy players and the company’s ability to keep costs in line as it chases liquidity at scale.