DraftKings Tumbles as Underdog and Crypto Com Bypass State Laws with CFTC Backed Derivatives 374th in Trading Activity

On September 3, 2025, DraftKings (DKNG) fell 0.48% with a trading volume of $0.27 billion, ranking 374th in market activity. The decline follows developments in the prediction market sector, where Underdog and Crypto.com launched a platform enabling peer-to-peer trading on sports outcomes in 16 U.S. states where traditional betting is restricted or prohibited. This move leverages a legal gray area by using CFTC-regulated derivatives, potentially competing with emerging platforms like Kalshi and Polymarket.

The partnership targets a $555 million market opportunity in 2025, exploiting gaps in states such as California and Texas, where legal sports betting remains unavailable. By offering real-time trading on contracts tied to NFL, NBA, and college football events, the platform bypasses state gambling laws, creating regulatory uncertainty as federal agencies evaluate jurisdictional boundaries. Analysts note the sector’s growth potential, with prediction markets increasingly seen as a hybrid of financial trading and sports betting, though long-term viability depends on regulatory clarity.

DraftKings faces indirect competition as traditional sports betting operators explore expansion into prediction markets. The entry of CFTC-registered platforms highlights the sector’s regulatory advantages, allowing operations without direct state oversight. However, challenges persist, including legal pushback from state regulators and tribal gaming bodies. While prediction markets remain unclassified as gambling under federal law, ongoing debates over jurisdiction could reshape the industry’s landscape.

Underdog’s collaboration with Crypto.com underscores technological innovation in the space, combining gaming expertise with compliance infrastructure. The platform’s focus on underserved markets aligns with broader industry trends, as companies seek to capitalize on consumer demand for flexible betting models. Despite regulatory risks, the sector’s rapid growth suggests it could evolve into a significant revenue stream, particularly as major players like DraftKings assess strategic responses.

Backtest results indicate that prediction market contracts launched by Underdog and Crypto.com have shown positive performance in early trials, with user engagement and liquidity metrics exceeding initial projections. The data highlights the platform’s ability to attract traders in restricted states, though long-term outcomes remain contingent on regulatory developments and market adoption rates.