IG Group to pay up to $1.3 billion to enter prediction markets

The British firm IG Group has agreed to acquire the US company Underdog, which operates in daily fantasy sports and prediction markets. The deal is worth up to $1.3 billion, of which around $1.1 billion will be paid upfront. The remainder is tied to Underdog’s revenue for 2026.

The announcement was made on 30 July, less than two weeks after Underdog launched its own sports contract exchange. For IG, this is its biggest move in the US and the culmination of a strategic review the company began on 19 March.

What Makes Up the Total Amount

Underdog’s business has been valued at approximately $1.1 billion on a debt-free basis. The equity portion of the payment will amount to around $963 million, to be settled through the issue of approximately 24.1 million new IG shares, plus around $380 million in cash. Upon completion of the transaction, IG will also repay Underdog’s debt of approximately $160 million.

On top of this, there is an earn-out of up to $200 million, which depends on Underdog’s revenue for 2026. Separately, an incentive scheme with a cap of $850 million has been set up for eligible Underdog employees, self-funded from Underdog’s own performance.

Over the twelve months to June 2026, Underdog’s net revenue totalled around $466 million, a 21 per cent increase on the previous year. The valuation of $1.1 billion corresponds to 2.4 times revenue. By way of comparison, in March 2025, following a $70 million funding round, the company was valued at $1.23 billion.

What IG Is Actually Buying

Underdog entered prediction markets in September 2025 and, in less than a year, became the third-largest US venue by regulated notional volume across prediction markets and DFS combination trades, behind only Kalshi and Robinhood. The company holds a full suite of licences, including those for brokerage, exchange and clearing. In July 2026, it launched its own exchange for sports event contracts.

Currently, the majority of trading volume in the sector is driven by sport. IG has announced plans to expand its offering beyond sport and entertainment to include cryptocurrencies, financial and macroeconomic indicators, as well as cultural and political events. Underdog will continue to operate as a separate business.

What Changes for IG Itself

The company expects the deal to have almost no impact on adjusted earnings per share in the first year. By the third year it should deliver double-digit growth and lift the return on invested capital above the group’s cost of capital.

On a combined basis, prediction markets and DFS will account for around 25 per cent of the group’s net trading revenue. This reduces IG’s reliance on a single business line.

Alongside the acquisition, IG has confirmed plans to redomicile to Jersey and has suspended its share buyback programme. It expects to resume the programme in 2027, subject to the redomicile being completed and depending on the share price and capital requirements. In the first half of the year, group revenue rose by 18 per cent to £642.8 million, and underlying profit increased by 4 per cent to £282 million.

The Price Is Set, the Rules Are Not

The figure of 1.3 billion sets the price tag for assets in prediction markets and shows that FTSE 100 financial companies, and not just specialist operators, are prepared to pay for them.

The legal status of the contracts themselves, however, remains a matter of dispute in certain states. Underdog’s licensing framework mitigates some of the risk, but does not eliminate it entirely. Whether the price holds up will depend on whether volume growth survives the first court decisions.