The deal gives IG Group a major foothold in the rapidly growing US prediction market sector, but regulatory uncertainty remains a significant risk.

IG Group has agreed to acquire US sports gaming and prediction market operator Underdog Sports Holdings in a deal valuing the company at an upfront enterprise value of approximately $1.1 billion.

The transaction also includes a potential $200 million earn-out for Underdog shareholders, while employees could receive up to $850 million through a separate management incentive plan if the company reaches ambitious future earnings targets.

The acquisition, expected to close in late 2026 or early 2027, represents one of the clearest signs yet of the growing convergence between traditional financial trading, sports betting and prediction markets in the US.

Underdog’s rapid growth

Founded by Jeremy Levine, Underdog has grown into a significant US sports gaming platform with more than 11 million registered accounts and five million depositing customers.

The company generated $466 million in net revenue during the 12 months to June 2026, representing year-on-year growth of 21%.

Prediction markets are also becoming increasingly important to its business. They accounted for 54% of Underdog’s total handle during the first half of 2026, demonstrating why IG sees the company as an attractive entry point into the sector.

Corfai partner Ben Robinson believes the structure of the acquisition means IG is not necessarily overpaying despite the significant headline valuation.

“It’s paid a sensible DFS revenue multiple for a business whose earnings are still catching up, and structured most of the expensive upside around performance,” Robinson said.

“In other words: prove it first.”

Huge targets attached to the deal

The management incentive plan demonstrates just how ambitious IG’s expectations are.

Underdog employees will only begin receiving payments if the company reaches $140 million in EBITDA in 2028. The maximum payout for that year requires EBITDA of $400 million.

By 2029, the maximum incentive payout would require Underdog to generate $700 million in EBITDA.

This means a significant proportion of the deal’s potential value will only be realised if Underdog develops into a highly profitable prediction market and sports gaming business.

Robinson therefore described the incentive structure as a form of protection for IG.

“The really expensive part of IG’s package is therefore a long way out. That looks more like protection than evidence of overpaying.”

Regulatory uncertainty remains

The biggest question surrounding the acquisition is the future regulatory position of prediction markets in the US.

Platforms such as Kalshi and Polymarket have rapidly expanded sports event contracts, but state gambling regulators, tribal gaming groups and other industry stakeholders continue to challenge whether these products should be considered financial instruments or gambling.

Wiggin lawyer Sam Martin believes the acquisition structure partly protects IG against these uncertainties.

“While the headline price may be eye opening – and reflective of the incredible growth in prediction markets – the deal structure itself may partly be seen as a strong expectation of growth but also effective hedging by IG against foreseen headwinds to the growth of prediction markets.”

H2 Gambling Capital managing director Ed Birkin also believes the valuation depends heavily on prediction markets maintaining their regulatory position.

“The valuation makes sense if you believe that the market is going to continue to grow and will be around, but clearly, if the market gets closed down in a huge number of states, then that makes things look very different.”

Can Underdog challenge Kalshi and Robinhood?

Underdog currently trails market leaders Kalshi and Robinhood in US prediction market trading volumes.

IG believes its financial-market expertise, balance sheet, technology and risk-management capabilities can help accelerate Underdog’s growth.

However, Robinson warned that infrastructure alone may not be enough to close the gap.

“I don’t think it suddenly closes the gap with Kalshi or Robinhood,” he said. “The licences and exchange technology matter, but they are becoming easier to buy or build. The harder thing to replicate is liquidity.”

Partis Capital vice president Oliver Jones similarly questioned how much of a competitive advantage IG’s institutional trading experience will provide, although its balance sheet could allow Underdog to provide more liquidity itself.

Eilers & Krejcik Gaming partner emeritus Chris Grove believes the sector remains at an early stage.

“We’re in the early stages of adoption, the early stages of product iteration, and much of the liquidity enjoyed by the current leaders is rented rather than owned.”

Corcoran and Levine reunite

The acquisition also reunites IG CEO Breon Corcoran with Underdog founder Jeremy Levine.

While CEO of Paddy Power Betfair in 2017, Corcoran oversaw the acquisition of Levine’s fantasy sports company DRAFT.

Corcoran later became a personal investor in Underdog before joining IG and currently holds an interest equivalent to approximately 0.34% of Underdog’s fully diluted share capital.

IG’s board allowed Corcoran to participate in negotiations surrounding the acquisition, although he did not participate in the formal board vote approving the transaction.

The existing relationship gives IG significant familiarity with Levine and his track record of building consumer sports gaming businesses.

Sportsbooks move into prediction markets

IG’s move comes as some of the biggest names in US sports betting are developing their own prediction market strategies.

DraftKings has acquired Railbird and launched DKeX, while FanDuel has partnered with CME Group. Fanatics has also moved into the sector through exchange and clearing infrastructure.

Jones believes these developments demonstrate how operators increasingly want greater control over the prediction market value chain.

Grove, meanwhile, believes the speed at which the category is developing means major gaming businesses can no longer afford to ignore it.

“The reality is that operators have a number of avenues to entry,” Grove said. “Some will build, some will partner and some will buy.”

IG sees opportunity beyond sports

IG’s ambitions with Underdog are not limited to sports.

The company believes the platform could eventually offer prediction contracts linked to crypto, financial markets, macroeconomic events, politics and culture.

Underdog’s exchange and clearing infrastructure could also potentially be integrated with IG’s existing financial trading businesses.

Birkin believes the convergence between betting and financial trading is not necessarily new.

“There’s been a convergence of financial trading and gaming for a long time,” he said. “Whether you’re looking at spread betting or betting exchanges, this is nothing new.”

What has changed is the potential scale of the US prediction market opportunity.

Investors have nevertheless reacted cautiously to the deal. IG shares fell around 20% following the acquisition announcement, while the company also paused its £125 million share-buyback programme after completing approximately £33 million.

The acquisition is therefore a significant bet on the future of prediction markets. IG is wagering that the sector will remain a permanent part of the US landscape, that Underdog can leverage its large existing customer base and that its own trading expertise can help the platform compete with established leaders.

With Underdog potentially required to generate $700 million in EBITDA by 2029 to unlock the maximum incentive package, the deal sets an exceptionally high bar for future growth.