Fantasy Apps Funnel Users to Sportsbooks
Trevor John, co-founder of Underdog Fantasy, on the business model of fantasy sports
The real edge here is distribution through a lighter rulebook, not a meaningfully different user experience. For a sports fan, tapping yes or no on whether a player clears a stat line, or buying a contract on a game outcome, feels very close to placing a prop bet in a sportsbook app. That matters because prediction markets can reach states where sportsbooks still cannot, while fantasy operators like Underdog have already shown how adjacent formats can pull users toward full betting products.
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Underdog already sits in this gray zone. Its core pick'em business lets users build entries around player stat outcomes, and the company is using that audience as a funnel into sportsbook launches. New York regulators forced Underdog to exit and pay a $17.5M settlement, which shows how fast adjacent products can collide with gaming rules.
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Prediction markets push the overlap even further. Kalshi offers sports event contracts nationwide under CFTC oversight, with an effective fee around 1%, versus sportsbooks that usually need state licenses, face gaming taxes, and make money on a 4% to 5% hold. Nevada and New Jersey both moved against Kalshi in March 2025, arguing these contracts are unauthorized sports wagering.
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The strategic pattern looks familiar. DraftKings and FanDuel used daily fantasy sports to build users before online sportsbooks were broadly legal. Prediction markets now use a similar path, except with a federal market structure that can open California, Texas, and other closed states immediately if it holds up.
The next phase is a convergence of app experiences and a fight over who controls the legal wrapper. Sportsbooks will keep adding market style products, fantasy apps will keep moving toward betting, and prediction markets will keep testing federal preemption. If event contracts remain broadly available, they can reset the map of US sports wagering by making nationwide access more valuable than state by state licensing scale.