Sports betting in the United States has encountered a bold new challenger, but not through the traditional route of sportsbooks or state-regulated gambling apps. Crypto.com and Underdog have joined forces to roll out sports prediction markets across 16 U.S. states where wagering on games remains illegal under existing gambling laws. Their model sidesteps conventional restrictions by avoiding the label of “betting.” Instead, it frames participation as trading contracts tied to sports outcomes—contracts that carry real financial stakes.

This ambitious development fuses financial engineering with sports fandom, creating a new category of speculative markets. The implications could ripple across the multi-billion-dollar U.S. gambling industry, challenge entrenched tribal gaming rights, and possibly set precedents for how regulators interpret event-based markets.

The Mechanics of a Market Without a Bookmaker

The architecture of this venture rests on a division of labor. Crypto.com’s North American derivatives subsidiary, CDNA, will manage the back-end infrastructure under its registered framework with the Commodity Futures Trading Commission (CFTC). Meanwhile, Underdog—already well known for its large customer base in fantasy sports—will serve as the front-facing platform, delivering the app interface where users execute trades.

The system operates with striking simplicity. Unlike sportsbooks, there are:

No bookmakers setting odds.

No licensing requirements from state gaming agencies.

No entity taking the other side of a wager.

Instead, the market itself determines price movements. If participants buy heavily into a particular outcome, that contract becomes more expensive. Traders who sell at the right moment can lock in profit. And if the eventual result proves correct, those holding winning contracts also earn. In essence, it mimics financial markets but within the realm of sports, elevating speculation to an asset class rather than a casino bet.

Underdog Takes the Lead Amid Market Curiosity

Among sports-tech firms, Underdog is making the first decisive foray into this hybrid of prediction markets and financial instruments. CEO Jeremy Levine emphasized the importance of this evolution during an interview on CNBC’s Worldwide Exchange:

“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.”

Competitors are monitoring this move with sharp interest. Robinhood, Kalshi, and Polymarket already host event-driven contracts, some tied to sports outcomes. However, their reach pales in comparison with Underdog’s established fantasy gaming ecosystem.

Meanwhile, giants in the betting sphere are not idle. FanDuel, through its parent company Flutter, recently partnered with CME Group to design financial products influenced by sports results. Similarly, DraftKings CEO Jason Robins has publicly voiced his enthusiasm for such models.

What sets Underdog apart, however, is the convergence of tactical timing, broad scale, and regulatory positioning. By relying on CDNA’s existing CFTC framework, the company gains a level of legitimacy and compliance protection not available to traditional operators navigating state-by-state licenses.

Gambling’s Gaps: A Massive Untapped Audience

The U.S. betting map highlights the strategic potential. California and Texas—America’s two most populous states—remain closed to legal sports wagering. Florida, the third-largest market, is controlled by the Seminole Tribe, which wields exclusive rights to casinos and sportsbooks through its Hard Rock brand.

This triad of exclusion amounts to tens of millions of consumers absent from the $16 billion online betting market recorded in 2024. For Underdog, the opportunity is clear: fill the void with financial-market contracts that don’t technically count as gambling under state law.

Legal Gray Zones and Tribal Sensitivities

Such an approach is not without controversy. Regulators and tribal stakeholders could soon test the legal resilience of sports prediction contracts. The CFTC has not yet issued definitive guidance on whether these instruments fall under futures, derivatives, or gambling. Courts too are divided, with some cases questioning whether prediction markets violate state sovereignty over gaming policy or encroach on Native American exclusivity under the Indian Gaming Regulatory Act (IGRA).

For now, momentum is on the side of innovators. Analyst Jordan Bender of Citizens Bank projected in April that prediction markets could generate $555 million in revenues by 2025. The figure remains modest compared to the $16 billion produced by legal betting last year, but the growth trajectory suggests rapid expansion if the model gains mainstream adoption.

Crypto.com’s Strategic Bet on CDNA

The role of CDNA, Crypto.com’s U.S. derivatives arm, is pivotal. By aligning its infrastructure with a platform like Underdog, Crypto.com is staking a claim to become the central utility provider of event contracts tied to sports. Travis McGhee, the company’s managing director and global head of capital markets, stated:

“We were the first to offer sports events contracts, and our technology partnership with Underdog will provide more access to CDNA’s innovative offerings.”

This partnership allows Crypto.com to diversify beyond crypto-exchange services, embedding itself into the financialization of sports entertainment. For investors, this suggests a dual-play strategy: exposure to the growth of digital asset exchanges while simultaneously tapping into prediction markets, a sector still at its infancy but drawing growing interest from institutional observers.

Strategic Implications for Investors and Industry Stakeholders

For institutional players, the rollout underscores the erosion of barriers between sports gaming, financial derivatives, and crypto infrastructure. What was once classified narrowly as gambling now occupies a liminal space between capital markets and consumer entertainment.

For investors, this opens an emerging asset class with asymmetric upside if regulatory approval stabilizes.

For gaming operators, it introduces a competitive disruption in states where traditional sports betting cannot operate.

For regulators and Native tribes, it presents a direct challenge that might force legal clarifications, renegotiations, or even new federal interventions.

The stakes are enormous. If this model withstands legal scrutiny, it could redefine the landscape of regulated sports involvement in finance—transforming speculative fandom into a vast market of tradable securities-like contracts.

Bottomline: A Market at the Edge of Regulation

Crypto.com and Underdog are not merely offering a new way to speculate on sports; they are redrawing the lines of what constitutes betting, trading, and financial participation in events. By leveraging existing CFTC frameworks, they may have found a legal shortcut into some of the most lucrative states locked out of conventional betting.

Yet, questions remain: Can regulators tolerate such innovation without formal rulemaking? Will tribal sovereignty become a sticking point? And how quickly will competitors follow the path Underdog and Crypto.com have begun forging?

For investors, analysts, and industry leaders, the rollout represents both a novel growth opportunity and a calculated legal gamble. In the intersection of sports, finance, and crypto, prediction markets now demand serious attention.