Underdog co-founder and CEO Jeremy Levine addressed shareholders at a virtual IG Group seminar on Thursday, clarifying what the London-listed trading firm is acquiring for $1.3 billion.
Levine described Underdog as a sports company that has transformed itself into a vertically integrated, federally regulated prediction markets operator, poised to adapt to the evolving U.S. market. This acquisition was announced by IG in July to enhance its American operations.
A strategy update is scheduled for October 22, where the company will share an updated strategy, capital allocation framework, and guidance. The seminar served as an in-depth overview of the Underdog business before the deal's closure, anticipated in late 2026 or early 2027, subject to U.S. regulatory reviews.
During the presentation, Underdog was highlighted as one of the most rapidly growing sports companies, with its transition to prediction markets already reflected in its financial performance. "Underdog gets us into a high-growth adjacent category spanning daily fantasy sports, prediction markets and more," IG CEO Breon Corcoran stated. He emphasized the rapid growth of prediction markets, particularly in sports, and noted that Underdog is specifically designed for this niche. Underdog experienced a strong performance in the third quarter, just before its busiest period, which includes the NFL and NBA seasons.
The details of the acquisition reveal an upfront valuation of $1.1 billion along with potential earnouts of up to $200 million based on Underdog's 2026 net revenue and positive EBITDA. IG will finance approximately 60% of this initial payment with around 24.1 million new IG shares and the remainder in cash. A management incentive plan could yield up to $850 million, contingent upon Underdog achieving a minimum of $400 million in EBITDA by 2028 and $700 million by 2029, as laid out in IG's announcement. Corcoran previously asserted that this acquisition positions IG as a frontrunner in U.S. prediction markets.
The deal emerged from a strategic review initiated by IG in March and is set to more than double its U.S. revenue while adding about 1 million average monthly active users. Currently, IG operates the U.S. brokerage tastytrade, which it plans to use to transition Underdog customers from sports contracts into financial trading.
The seminar also illustrated Underdog's strategic departure from the daily fantasy sports model. Since its inception in 2020, Underdog's net revenue surged from $9 million in 2021 to a projected $441 million by 2025, as noted by Levine. He explained that regulations associated with daily fantasy sports limited Underdog's offerings to about one-third of what customers desired compared to full sportsbooks, with availability in only 36 states. While Underdog was able to provide stat-related player picks, it lacked options for team-based picks, spreads, moneylines, and totals.
The advent of prediction markets lifted those regulatory constraints. In September 2025, Underdog launched its predictions feature on Crypto.com’s exchange, expanded into 30 states, and subsequently integrated Kalshi markets through its own futures commission merchant. By March, predictions accounted for half of Underdog's total handle. The firm acquired both designated contract market and clearinghouse licenses and introduced its own trading platform, Underdog Exchange, in July.
Levine explained that Underdog now offers a core sports experience across 46 states under a unified federal regulator, the Commodity Futures Trading Commission. Its daily fantasy sports product, limited to player-only picks, operates under state regulations in 36 states. He referred to the application as a "super app," which directs customers to various options such as fantasy and Underdog Exchange through a proprietary orchestration layer.
This new strategy came with costs, as Underdog relinquished its fantasy licenses in seven states: Massachusetts, Maryland, Michigan, Mississippi, New Jersey, Ohio, and Pennsylvania.
Underdog's seminar also provided a preview of its third-quarter performance. Its preliminary Q3 2026 handle reached approximately $1.08 billion, reflecting a year-over-year increase of 199%, while net revenue of around $105 million surged by 118%. Levine attributed this revenue spike to strong results during the World Cup and a comparatively weak performance in Q3 2025.
User growth, however, wasn't as robust. The estimated average number of monthly active users stood at 705,000 in the third quarter, a 13% increase but a decrease from 1.07 million in the first quarter and 836,000 in the second quarter. Year-to-date net revenue has reached about $355 million, showing a 30% increase.
Levine pointed out that the fourth quarter typically accounts for over a third of annual revenue, estimating about $147 million or more, with the NFL and NBA seasons expected to contribute significantly.
Between September 8 and October 7, the Underdog Exchange traded $972 million in contracts, marking a 137% increase from the prior month but accounting for just 1% of the overall prediction market volume, where Kalshi holds a dominant 78% share.
Levine addressed potential regulatory challenges, outlining two possible futures: a federal framework that would allow the company to offer a full suite of sports markets across the nation, or a state-led framework that would limit options to player-only fantasy markets in roughly two-thirds of states, including significant non-betting markets like California and Texas.
He expressed confidence in Underdog’s preparedness for either scenario, noting, "We feel really well set up for any outcome… We certainly would like the uncertainty or the limbo to get answered sooner rather than later."
Underdog currently faces legal challenges in multiple states, but Levine emphasized a focus on maintaining financial markets, game offerings, and a unified app for customers. He also announced ongoing innovations, with new products including Streaks, Ladders, Crash, and Rips expected to launch this month.
"Our revenue is well diversified, and we’re well set up to succeed under any likely regulatory outcome," he stated. "And we now head into our biggest quarter of the year with the best product we’ve ever had."
