Brooklyn-based fantasy sports app Underdog raised a $35M Series B at a $485M valuation, and plans to launch licensed sports betting in Ohio and Colorado in 2023
Katherine Sayre / Wall Street Journal :
Context & Ripple Effects
Underdog's Series B lands in a market whose funding template was set a decade earlier by the fantasy duopoly: Disney's $250M investment valuing DraftKings at $900M and FanDuel's $275M KKR-led round above $1B both in 2015, followed by FanDuel's 2017 convertible note as capital tightened. Underdog's $485M valuation is the challenger entry into that same fantasy-to-betting funnel, with Ohio and Colorado as its first licensed sportsbook states.
The later coverage confirms the trajectory this raise set in motion: a $70M Series C tranche at a $1.23B valuation in 2025, and a prediction market built with Crypto.com spanning 16 states — both moves that only make sense once a fantasy user base has been converted into a licensed betting operator.
First-order effects
- The $35M funds Underdog's transition from daily fantasy app to licensed sportsbook operator, with Ohio and Colorado as the first two states where it can legally take bets in 2023.
- Underdog immediately joins DraftKings and FanDuel as a direct competitor in state-regulated betting markets, rather than competing only for fantasy contest entry fees.
Second-order effects
- Incumbent economics define the battleground: betting data from Illinois, New Jersey, and Colorado shows parlays driving revenue growth for FanDuel and DraftKings, so a new entrant's sportsbook lives or dies on parlay product rather than straight bets.
- Each additional state license raises the capital threshold for challengers, pushing fantasy apps toward staged rollouts like Underdog's two-state start instead of national launches.
Third-order effects
- If the fantasy-to-sportsbook conversion holds as a playbook, the category's endgame is broader wagering products — as Underdog's later move into prediction markets with Crypto.com shows, the license and user base become a platform for new bet types beyond traditional sportsbooks.
- The funding arc from the 2015 duopoly rounds through Underdog's Series C suggests fantasy platforms, not casinos or media companies, remain the primary vehicles venture capital uses to enter US regulated betting.
The trend: Fantasy sports platforms are converting their contest user bases into licensed sportsbooks and then prediction markets, with state-by-state licensing pacing the expansion.