Fantasy and sports betting operator Underdog has launched sports event contracts, becoming the first business in the fantasy or traditional sportsbook world to do so, through a partnership with Crypto.com, in which Underdog is officially considered a “tech provider,” the company announced via press release Tuesday.
Status as a tech provider — an untested path so far — appears to allow Underdog to offer contracts within its app without needing to be a member of the National Futures Association (NFA).
The contracts are available now within the Underdog app. According to CNBC, which first reported the news, the contracts will only be offered in 16 states, “mostly focused on where legal sports betting has not been adopted.”
Crpyto.com already offers its own sports event contracts as a designated contract market (DCM) registered with the Commodity Futures Trading Commission (CFTC). Launching in December 2024, it was the first CFTC-registered exchange to introduce sports event contracts.
It’s much smaller than rival Kalshi and offers fewer contracts. Kalshi’s sports betting volume dramatically increased after its sports contracts became available on stock trading app Robinhood. Crypto.com may experience a similar boost from its partnership with Underdog.
This appears to be the first instance of a business voluntarily blocking access to sports event contracts in certain states. Robinhood blocks access to these contracts in Maryland and previously did so in Nevada and New Jersey, but only after the states sent out cease-and-desist letters.
Offering sports event contracts only in limited states may allow Underdog to operate in states with high demand for sports wagering options while providing less risk to its existing sports betting and fantasy licenses. A regulator in a state where Underdog is already licensed to offer sports betting or fantasy may attempt to take action against the business if it also offered sports event contracts in that state.
However, there’s no guarantee that blocking most legal betting states would guarantee safety from regulatory action in the blocked states. Last month, the Ohio Casino Control Commission warned sportsbook licensees that they could lose their licenses for partnering with a company that offers sports event contracts in Ohio, even if the licensee itself does not do so. Because Crypto.com offers sports event contracts in all 50 states, the Ohio letter could apply to Underdog.
New regulatory path?
Underdog is taking a previously unexplored regulatory path in order to offer these contracts.
The two main ways to offer access to a registered exchange’s markets are as a futures commission merchant (FCM) or as an introducing broker (IB).
But Underdog will instead be a vendor or tech provider that facilitates trades on Crypto.com, a person familiar with Underdog’s new offering told InGame.
Underdog’s application for membership of the NFA — submitted five months ago — is still pending. But NFA membership is not required for a tech provider.
So far, no other business has attempted to get into sports event contracts via this path. It is not clear whether the CFTC could consider certain actions taken by a tech provider as getting too close to the role of an FCM or IB, and take any action accordingly.
Levine calls prediction markets ‘exciting’
Underdog Founder and CEO Jeremy Levine said he was excited by the opportunity.
“Prediction markets are one of the most exciting developments we’ve seen in a long time,” Levine said in a statement. “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 Derivatives North America (CDNA), added that the deal would help improve access to the site’s contracts.
“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,” McGhee said in a statement. “We were the first to offer sports events contracts, and our technology partnership with Underdog will provide more access to CDNA’s innovative offerings.”
Other sportsbooks and fantasy businesses appear to be exploring the prediction market space, though nobody else has launched yet or announced plans to launch sports event contracts specifically. FanDuel last month announced a partnership with CME to launch its own event contracts, but these will focus on non-sporting events — at least initially — and will start “later this year.”
DraftKings has said it’s exploring the opportunity and has a pending NFA application but, as of its second quarter earnings call a month ago, was still in “monitor mode.” It was linked to an acquisition of CFTC-registered exchange Railbird, but later reports said these talks had “fallen apart.”
Underdog’s main daily fantasy sports rival PrizePicks also has a pending NFA application.
