Underdog, a fantasy and sports betting operator, will roll out sports prediction markets in 16 states, founder and CEO Jeremy Levine told CNBC on Tuesday.
Underdog is partnering with Crypto.com Derivatives North America (CDNA), an exchange already registered with the Commodity Futures Trading Commission (CFTC).
“Prediction markets are one of the most exciting developments we’ve seen in a long time,” Levine said in a release. “While still new and evolving, one thing is clear – the future of prediction markets is going to be about sports – and no one does sports better than Underdog.”
State gambling regulators are scrutinising prediction markets, which some operators see as a way to sidestep state-by-state sports betting rules. Operators like Kalshi are regulated federally by the CFTC. Federal regulation allows the markets in states in which sports betting is not legal, including California and Texas.
Underdog will focus its prediction markets efforts in states without legalized sports betting, according to CNBC.
Underdog prediction markets offerings
Instead of placing a wager, users buy contracts that pay out if their prediction comes true, creating a tradeable market. Through Underdog’s app, users can now trade their opinions on a variety of sports events, including NFL, college football, NBA, MLB and other major sports leagues.
CDNA will provide the contracts, but Underdog will host them on its proprietary platform.
According to Underdog, it is the first company to offer fantasy sports, sports betting and prediction markets in one app.
“We are thrilled to partner with Underdog to enhance the sports experience for customers nationwide with the ability to now trade using Underdog’s technology, all in one app,” Travis McGhee, managing director and global head of capital markets at Crypto.com, said in the release. “We were the first to offer sports events contracts and our technology partnership with Underdog will provide more access to CDNA’s innovative offerings.”
Growing options for event trading
While Underdog will be the first operator to offer event trading on the same platform as its fantasy and sports betting offerings, it is not the only sportsbook company entering the event trading arena.
Last month FanDuel announced it would launch a sports prediction markets platform in a joint venture with CME Group.
DraftKings, meanwhile, is also looking into prediction markets, according to recent earnings call comments from CEO Jason Robins.
While event trading could offer a way around state regulations, some state regulators are already issuing warnings about the potential offerings.
The Ohio Casino Control Commission sent a letter last week warning sports betting licensees it views predictions as sports betting. The commission warned that offering prediction markets under a sports betting licence could jeopardise those licences.
What could sports prediction markets be worth?
Industry analysts estimate US prediction markets could reach several billion dollars in annual handle if widely adopted, although firm projections remain uncertain given the unsettled regulatory environment. Multiple state and federal lawsuits are under way to determine whether sports event contracts qualify as sports betting.
“I think the hype that all of this is going to displace state-regulated sports betting entirely to be a bit overblown,” industry consultant Dustin Gouker wrote in his newsletter, The Event Horizon. “But I do think it’s a compelling offer in places that don’t have legal online sports betting — or much in the way of competition – for better or worse.
“But Underdog + Crypto is just the start. More of these deals are coming, whether you’re ready or not.”
Underdog will integrate federally regulated sports prediction markets into its app, partnering with Crypto.com Derivatives as regulators weigh the future of event trading.