What is IG Group really betting on with its $1.3bn Underdog deal?

IG Group’s acquisition of Underdog is being presented as a bet on the future of prediction markets. It is also, more subtly, a bet that a financial-trading company can bring something that gaming companies increasingly need: capital, risk management and an appetite for markets that do not fit easily into the old categories. 

The wager is large. On 30 July IG announced that it had agreed to buy Underdog Sports Holdings for an upfront enterprise value of about $1.1 billion, with a further earn-out of up to $200 million for shareholders. Separately, Underdog employees can receive as much as $850 million under a management incentive plan (MIP), provided the business produces extraordinary levels of future earnings. Completion is expected in late 2026 or early 2027. 

That makes the headline number of $1.3 billion both simultaneously accurate and slightly misleading. The $850 million MIP is not consideration paid to Underdog’s sellers. It is a reward for management if the business delivers the sort of growth IG believes is possible. 

This distinction matters. It is one reason Ben Robinson, a partner at Corfai, thinks the price looks less extravagant than the headline suggests. “IG is paying $1.1 billion, or about 2.4x Underdog’s last twelve months’ revenue. Even including the full seller earnout, that only rises to around 2.8x.” 

That is obviously not cheap. But nor is it the sort of valuation that requires a huge bet on the entire prediction-market industry on day one. 

The closest public comparison is PrizePicks, which Allwyn agreed to acquire for an upfront enterprise value of $2.5bn. That represented roughly 2.9x last-12-month revenue and 7.4x EBITDA. Underdog is worth less relative to its revenue, but more relative to its earnings because it has lower margins. 

“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,” says Robinson. “In other words: prove it first.” 

That is the important feature of the transaction. The really ambitious valuation comes later. 

The first tranche of the MIP kicks in at $140 million of 2028 EBITDA, compared with an annualised first-half run-rate of roughly $115 million. The maximum 2028 payout requires $400 million of EBITDA, while the 2029 component reaches its maximum only if EBITDA hits $700 million.

The difference between those numbers and Underdog’s present earnings is the real price of the deal, experts point out.

The expensive part comes later 

Underdog’s growth has been rapid. Its net revenue for the 12 months to June 2026 was $466 million, up 21% year-on-year, according to IG. Prediction markets accounted for 54% of handle in the first half of the year. The company had five million depositing customers and more than 11 million registered accounts. 

But growth is no longer accelerating at quite the same pace. 

Robinson points to an apparent slowdown in first-half of 2026 growth to around 11%, while prediction markets have become more than half of handle. That creates a question more fundamental than the valuation: how much of the prediction-market boom represents genuine new growth? 

“Are prediction markets creating genuinely new revenue, or are existing customers simply moving spend from DFS?” he asks. 

To get to $400 million of EBITDA in 2028, Underdog will need another substantial acceleration. That helps explain why IG has pushed so much potential value into earn-outs and incentives. 

Sam Martin, a lawyer at Wiggin, argues that the deal is not merely evidence that IG expects explosive growth. It is also a protection against the possibility that the growth story collides with regulation. 

“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 predictions markets,” he says. 

Those headwinds are considerable. State regulators, tribes, consumer groups and established gambling interests have challenged the idea that sports contracts offered through federally regulated prediction-market venues should be treated as financial products rather than gambling and various legal cases against prediction markets are in motion.

The legal uncertainty is therefore not separate from the valuation. It is part of the valuation. 

Ed Birkin, managing director at H2 Gambling Capital, is more cautious. 

“I suppose 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.” 

That is perhaps the cleanest description of the investment case: the upside is enormous, but so is the uncertainty around the addressable market. 

The Corcoran-Levine connection 

There is another reason this deal deserves closer inspection. Jeremy Levine, Underdog’s founder, is not a new acquaintance of Breon Corcoran, IG’s chief executive.

In 2017, when Corcoran was running Paddy Power Betfair, the company acquired Levine’s DFS business DRAFT. The transaction initially involved $19 million of consideration, with another $29 million linked to performance. 

The history is more than a colourful footnote. It means that Corcoran has seen Levine build a business, sell it, and then build another one. 

And this time Corcoran was not just an interested observer. 

IG Group disclosed that the CEO owns a personal interest equivalent to about 0.34% of Underdog’s fully diluted share capital: roughly 0.30% through preferred shares and 0.04% through options. Those investments were made in 2021 and 2023, before he joined IG Group. The board approved his involvement in negotiating the transaction, but he recused himself from the formal board vote approving it. 

That disclosure gives the relationship rather more substance than the usual “they go way back” description. 

Robinson points to “a high degree of familiarity with both the founder and the model”, noting that Corcoran previously acquired Levine’s DRAFT and later invested personally in Underdog. 

There is an interesting link here. Levine’s other major exit, StarStreet, was acquired by DraftKings. A founder who has sold businesses to three of the most recognisable names in American betting and trading is proving to have an unusually effective exit strategy.

But familiarity is not the same as certainty. Indeed, the structure of the Underdog deal suggests that even a buyer with considerable knowledge of the founder is unwilling to pay entirely for the future today. 

Buying liquidity – or buying the customer? 

The competitive question is harder. Underdog ranks behind Kalshi and Robinhood by US regulated notional-volume flow, according to IG Group’s own methodology. It only launched its own exchange in July, meaning much of its initial prediction-market growth has taken place through external infrastructure. IG Group believes its balance sheet and trading expertise can help Underdog capture more of the value itself.” 

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

Oliver Jones, vice president of Partis Capital, is also sceptical that IG Group’s expertise will immediately change the competitive picture. “I don’t see technical or institutional competence translating into a competitive advantage that materially moves the needle for Underdog,” he says. But he sees a potential benefit in IG Group’s balance sheet through the “internalisation of liquidity provision” – while warning that prediction markets are still heavily focused on sports and may require more specialist pricing expertise. 

Chris Grove, partner emeritus at Eilers & Krejcik Gaming, reaches a similar conclusion. 

“I view the competitive landscape for prediction markets as highly fluid. 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,” he says. 

Prediction markets are not necessarily going to reproduce the sportsbook market’s eventual division between a couple of enormous consumer brands. 

Kalshi has a substantial liquidity advantage. Robinhood has enormous distribution. Underdog has a sports-focused brand and a large existing customer base. IG Group brings capital and a financial-market track record. 

The market may be less a battle between a few big companies and more a split between the companies that run prediction-market exchanges and the companies that bring in customers. 

“In prediction markets, the exchange layer may consolidate while distribution remains fragmented across strong consumer brands,” Robinson argues. 

The prize is not simply owning an exchange. It is owning the customer, building the best product and acquiring users efficiently. 

That is precisely where Underdog has an advantage. 

The sportsbooks cannot ignore it 

The transaction nevertheless puts pressure on the incumbents. 

DraftKings has acquired Railbird and launched DKeX. FanDuel partnered with CME Group, while Fanatics has agreed to buy exchange and clearing assets. The industry is therefore experimenting with several models at once. 

Jones argues that the broader shift is already under way. “The moves are already happening, just not necessarily through acquisitions,” he says, pointing to exchanges, brokers, hedge funds and market makers positioning themselves through investment, partnerships or simply by learning the market. For sportsbooks, he says, “the playbook increasingly seems to be to own more of the value chain”. 

Grove pitches in: “It feels increasingly difficult for consumer brands in the gaming or trading verticals to stay on the sidelines of the prediction market opportunity. The reality is that operators have a number of avenues to entry, and the next wave of operators is likely to pursue a similar mix of avenues as the first wave. Some will build, some will partner and some will buy.” 

Martin says traditional sportsbook operators are l...