IG Group Bets $1.3bn on Underdog Acquisition to Secure US Exchange and Licensing Architecture

IG Group Holdings plc has agreed to acquire US daily fantasy sports (DFS) and event contract operator Underdog in a transaction valued at up to $1.3bn (£1.02bn), marking a aggressive strategic pivot into the rapidly expanding US prediction markets sector.

Announced on 30 July 2026, the deal allows the London-listed trading group to bypass years of regulatory hurdles by purchasing an established operational framework. The acquisition hands IG a fully integrated US trading stack—encompassing brokerage, exchange, and clearing capabilities—regulated federally by the Commodity Futures Trading Commission (CFTC).

Under the terms of the deal, IG will pay an initial enterprise value of approximately $1.1bn (£860m)—representing 2.4 times Underdog’s net revenue for the 12 months ending 30 June 2026—plus an earnout of up to $200m tied to 2026 financial performance. The upfront equity consideration of approximately $963m will be settled via $380m in cash and the issuance of 24.1 million new ordinary shares (representing 6.8 per cent of IG's enlarged capital). IG will also refinance $160m of Underdog debt at completion, backed by a $950m bridge facility provided by Barclays and Goldman Sachs.

A separate employee incentive scheme capped at $850m sits outside the acquisition consideration and will require Underdog to deliver $400m in EBITDA by 2028 and $700m by 2029 to trigger maximum payouts.

Strategic Footprint: Youthful Demographics and Federal Scope

Founded in 2020, Underdog is the second-largest US daily fantasy sports provider behind PrizePicks. The business posted net revenues of $466m for the 12 months to 30 June 2026—up 21 per cent year-on-year—and turned EBITDA-positive in Q1 2026.

Crucially, the acquisition grants IG access to Underdog’s registrations—which exceed 11 million accounts—and over five million depositing users, more than 60 per cent of whom are under 30. On a pro-forma basis, the transaction reduces IG’s average client age from 42 to 34 while raising US revenue contribution from 22 per cent to 40 per cent.

Breon Corcoran, Chief Executive Officer of IG Group, noted that the deal positions the firm "at the front of that convergence" connecting retail trading, investments, and entertainment.

Single Federal Regime vs State-by-State Frameworks

By focusing on CFTC-regulated event contracts rather than conventional sports betting, IG gains access to a single federal regulatory framework spanning roughly 50 states—bypassing the state-by-state licensing required for sportsbooks.

Unlike sportsbooks, which carry book risk, or DFS models restricted to multi-athlete combinations, prediction exchanges operate on a traditional brokerage commission model on volume, with market makers assuming execution risk. Industry projections cited by IG estimate the mature annual revenue pool for US prediction markets at $76bn, compared to $18bn for sports betting and $9bn for daily fantasy sports. Underdog has aggressively leaned into this shift, with event contracts accounting for 54 per cent of its handle in H1 2026, up from 14 per cent across 2025.

Market Reaction, Legal Friction, and Industry Perspective

Despite IG reporting an 18 per cent increase in H1 2026 revenue to £642.8m, investors reacted cautiously to the transaction details and the temporary pause of IG's £125m share buyback program. Shares in IG fell approximately 11 per cent to 1,522p in morning trading following the announcement. Corcoran, who held a 0.34 per cent personal stake in Underdog as an early investor, recused himself from the board’s formal vote on the transaction.Legal complexities also remain. While prediction markets operate under CFTC oversight, 16 US states are currently contesting federal authority over sports-based event contracts in court.

Commenting on the acquisition's rationale, legal analyst Anson Wong observed that IG essentially "bought a fast pass", arguing the valuation reflects early-market entry rather than proprietary technology.

Industry commentator John Lothian placed the deal in context with IG’s historical efforts in the space, including its previous ownership of Nadex:

Underdog is more than an exchange license: it is a customer-acquisition funnel linking fantasy sports, sports prediction markets and financial event contracts, a feeder system moving retail traders from touchdowns and home runs to interest rates, inflation, bitcoin and crude oil.

Conversely, gaming attorney Peter Hammon suggested the timing reflects broader market realities facing DCMs, calling it "a market maker world and the DCMs are just living in it for now" due to the limited supply of institutional liquidity providers capable of pricing US sports at scale. Subject to CFTC, NFA, and Hart-Scott-Rodino Act regulatory clearances, the transaction is expected to complete in late 2026 or early 2027.

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