Underdog Integrates Federal Sports Prediction Markets with Crypto.com Amid Regulatory Scrutiny
Underdog, a prominent player in the fantasy sports and betting realm, is set to expand its offerings by incorporating federally regulated sports prediction markets into its platform, with news of the partnership with Crypto.com Derivatives emerging on Tuesday.
This collaboration marks a significant step as Underdog teams up with Crypto.com Derivatives North America (CDNA), a fully registered entity with the Commodity Futures Trading Commission (CFTC). According to Jeremy Levine, the founder and CEO of Underdog, prediction markets represent a groundbreaking evolution in sports engagement. "The potential of prediction markets is immense. As they evolve, it’s clear that sports will lead the way, and nobody matches Underdog’s expertise in this area,” he stated.
The context for this development lies in the ongoing scrutiny from state gambling regulators regarding prediction markets, which some see as a workaround to navigate the varying landscape of sports betting laws across states. Operators like Kalshi operate federally under CFTC regulations, allowing them to function in areas where sports betting remains prohibited, such as California and Texas.
Underdog aims to target states where sports betting is not yet legalized for its prediction market expansion, providing an opportunity for users in those regions to participate in event trading.
Exploring Underdog’s Prediction Market Features
Rather than traditional wagering, Underdog users will engage by purchasing contracts that yield payouts upon correctly predicting outcomes, effectively creating a new trading landscape. The app will support trading across a range of sports events, including NFL, NCAA football, NBA, MLB, and more.
Although CDNA will supply the contracts, Underdog will host and manage these offerings on its custom platform. Boasting itself as the first operator to blend fantasy sports, sports betting, and prediction markets within a single app, Underdog presents a unique value proposition that could appeal to a broad audience.
Travis McGhee, managing director at Crypto.com, expressed enthusiasm about the collaboration, emphasizing its potential for enriching the sports experience for users nationwide. "This partnership empowers customers to trade via Underdog’s innovative technology, consolidating everything into one seamless application," he noted.
The Increasing Landscape of Event Trading
While Underdog is pioneering this fusion of offerings, it is not alone in venturing into prediction markets. Recently, FanDuel announced a partnership with CME Group to launch its own sports prediction market platform. Additionally, DraftKings has indicated interest in exploring similar options, suggesting that the trend is gaining traction within the industry.
However, the emergence of event trading has sparked caution among some regulators. For instance, the Ohio Casino Control Commission recently issued a warning to sports betting operators, indicating its view that prediction markets could be classified similarly to sports betting, raising concerns about compliance and licensing.
Potential Worth of Sports Prediction Markets
Industry experts speculate that the U.S. prediction markets could potentially generate billions in annual revenue if they achieve widespread adoption, although the current regulatory landscape introduces uncertainty. Ongoing legal battles aim to clarify whether sports event contracts fall under the umbrella of sports betting.
As Dustin Gouker, an industry consultant, mentioned in his analysis, the notion that prediction markets will entirely replace state-sanctioned sports betting may be exaggerated. "However, in areas lacking legal online sports betting or facing limited competition, prediction markets present a captivating alternative."
“Underdog’s collaboration with Crypto.com is merely the beginning. Expect to see more partnerships in this evolving landscape,” he concluded, hinting at a future of innovation in sports betting and prediction markets.