Time to play with the big dogs?
Competition in the sports prediction market has shifted gears following the announcement that Underdog, one of the fast-growing fantasy and gaming platforms, is teaming up with cryptocurrency exchange heavyweight Crypto.com.
Underdog, now backed by CFTC-regulated Crypto.com Derivatives North America (CDNA), will also be able to engage with players in key markets such as Texas and California, where traditional sports betting is still prohibited.
The alliance between Underdog and Crypto.com will be a powerful new contender to take on the likes of established brands, including Kalshi and Polymarket.
The news follows a series of publicized partnerships centered around sports event contracts trading as a CFTC-registered exchange. Perhaps the most notable being FanDuel (NYSE: FLUT) joining forces with derivatives platform CME Group (NASDAQ: CME) and Polymarket’s sudden return to the U.S. market, having acquired QCEX.
However, Underdog’s entry will be the first licensed sports gaming platform to amalgamate the prediction markets directly into its app.
Underdog poised to tap into its existing sports user base
Undoubtedly, the primary appeal of prediction markets is that they function more like financial exchanges than traditional online sportsbooks. In doing so, users trade contracts tied to the outcome of sporting events, which often creates higher odds prices compared to sportsbooks with built-in margins.
The model has proven popular on platforms such as Kalshi and Polymarket, which also facilitate trades in relation to political and financial event contracts. Yet, Underdog will have direct access to its fantasy and sports bettor user base already engaging with leagues, including the NFL, NBA, and MLB.
The Most Popular Prediction Markets Operators
| Operator | Valuation (Estimated) | Availability | Accepted Payments |
| Kalshi | $2 billion | CFTC Regulated – Nationwide | Debit Card, Bank & Wire Transfer, & Crypto |
| Underdog | $1.23 billion | CFTC Regulated – Nationwide | Credit/ Debit Cards, PayPal, Bank Transfer, Crypto, and Apple & Google Pay |
| Polymarket | $1 billion | CFTC Regulated – Nationwide | USDC |
| Sporttrade | $216 million | Arizona, Colorado, Iowa, New Jersey, and Virginia | Bank Transfer, PayPal, Venmo |
Nevertheless, the prediction markets still have some hurdles to clear, as evidenced by Kalshi’s recent legal defeat at the hands of Maryland regulators.
Still, at least for now, Underdog, Kalshi, and Polymarket will continue elsewhere operating under CFTC oversight that effectively bypasses state regulators.
Sportsbooks rush to join the party
While Crypto.com is not a newcomer to the sports event contracts – having pipped Kalshi’s own entry into the market by a matter of weeks – but its own platform never truly took off. However, in partnering up with Underdog, it derives an inherent legitimacy thanks to Underdog’s gaming licenses.
It’s fair to say the emergence of prediction markets continues to garner traditional gaming investors’ interest. It would certainly explain the apparent rush of sportsbook firms, including DraftKings (NASDAQ: DKNG), disclosing plans to diversify their product offerings.
The timing of the union also coincides with the start of the new NFL season later this week, an indicator that mirrors Citizen’s gaming analyst Jordan Bender’s sentiments of the lucrative nature of sports betting markets. Writing in April, he estimated prediction markets would generate $555 million this year, in contrast to the $16 billion legal U.S. sports betting market in 2024.
Given Underdog’s $1.23 billion valuation, celebrity investors, and a loyal user base, they should be well-positioned to help bridge the gap between sports betting and Wall Street-style trading.
