The debate over prediction markets in the US reached a new milestone this week, as Brooklyn-based operator Underdog announced a new partnership with Crypto.com’s Derivatives North America (CDNA).
The collaboration introduces fully regulated sports event contracts into the Underdog app, marking the first time a major US sports gaming operator has integrated prediction markets alongside fantasy sports and sports betting.
The announcement positions Underdog at the center of a rapidly evolving – and rather contentious – market. While the US Commodity Futures Trading Commission (CFTC) has already approved CDNA as a registered exchange and clearinghouse, the legality of sports prediction markets remains a grey area in many states, with regulators and tribal operators questioning whether they represent gambling by another name.
Under the deal, CDNA sports event contracts will be powered by Underdog’s proprietary technology, allowing users to buy and sell contracts on outcomes across leagues – including the NFL, NBA, MLB and college football.
Prices update in real time, giving customers a way to “trade” their opinions on what will happen during live sports.
Commenting on the development, Jeremy Levine, Underdog’s Founder and CEO, stated: “Prediction markets are one of the most exciting developments we’ve seen in a long time. 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.”
Travis McGhee, Managing Director and Global Head of Capital Markets at Crypto.com, added: “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.
“We were the first to offer sports events contracts, and our technology partnership with Underdog will provide more access to CDNA’s innovative offerings.”
Notably, both companies stress that this model operates within a federally compliant framework. As a CFTC-regulated entity, CDNA’s contracts differ from offshore prediction exchanges that have drawn enforcement actions in the past.
This legal positioning may allow Underdog to offer products that straddle both gaming and financial regulation.
The timing of the partnership is significant. In August, FanDuel and CME Group announced a joint venture to launch event-based contracts tied to financial indicators such as stock indices, commodities and crypto. That deal, still pending CFTC approval, does not yet include sports.
DraftKings has also signaled interest in prediction markets, with CEO Jason Robins describing them as a “powerful lever” during a June earnings call, though the company recently withdrew an application to sell derivatives.
By moving first, Underdog has carved out a unique position. It is now the only operator in the US offering fantasy sports, a sportsbook and prediction markets within a single app. This could, perhaps, accelerate mainstream acceptance of prediction markets while forcing competitors to play catch-up.
Despite the potential, however, serious questions linger. Tribal operators and legal experts have warned that prediction markets could undermine regulated gaming, particularly if they attract sports bettors outside state-licensed frameworks.
At the Indian Gaming Tradeshow earlier this year, panelists described prediction markets as a “serious threat” to tribal gaming and predicted a “seismic shift” in regulatory oversight if they continue to expand unchecked.
Whether prediction markets ultimately become a mainstream gaming vertical may depend on how regulators interpret them. Currently, the CFTC views event contracts through the lens of derivatives, while state gambling regulators have been more cautious.
With major players like FanDuel, DraftKings and now Underdog entering the space, pressure will mount for clearer federal and state guidance.
For Underdog and Crypto.com, the partnership signals confidence that prediction markets will move beyond experimental exchanges like Kalshi and Polymarket to become a core feature of US sports engagement.
For the wider industry, it raises a pressing question: are prediction markets the next big frontier in sports gaming, or a regulatory flashpoint waiting to happen?
