North Carolina Sports Betting Has Changed Forever

Right at the end of 2025, the North Carolina sports betting market saw Underdog shudder its gambling operations in favor of launching prediction markets. Many put a pin in this development. Now, all this time later, it’s time to revisit Underdog’s decision—because it means not only a great deal for The Tar Heel State, but potentially online sports betting in the United States at large.

After establishing itself as a daily fantasy sports industry leader, Underdog started expanding into the gambling market. The North Carolina markets ranked among the few in which it was active. The company pulled the ripcord on the Missouri sports betting license it previously won. And while it has a license for sports betting in Ohio, industry experts do not expect them to ever use it.

Underdog’s decision to close up their North Carolina sports betting operations provides critical insight into why. They clearly prefer venturing into prediction markets—the same prediction markets that we are repeatedly told will not be powerful enough to convince sports betting sites to reinvent their business model.

Naturally, this raises a simple-yet-salient question: What gives?

Though Underdog’s decision could be an isolated incident, it might also, in theory, be a harbinger of things to come. The possibility is at the very least worth discussing. Prediction markets clearly aren’t going anywhere. Never mind what’s happening with the North Carolina sports betting market. Industry powerhouses DraftKings and FanDuel have launched their own prediction markets. They maintain these will only be available in places where they do not have sports betting licenses. But with prediction markets subject to looser restrictions, it’s entirely plausible running them ends up being the more palatable route to companies.

The Real Reason Why Underdog Closed North Carolina Sports Betting Operations

The exit of Underdog from the North Carolina sports betting market does not signal a decline in gambling interests. Monthly reports suggest that sports betting in The Tar Heel State remains incredibly popular.

For Underdog specifically, the issue was overall market share. While North Carolina isn’t regularly publishing individual sportsbook breakdown, we already know FanDuel and DraftKings lead the field by a large margin. According to Grand Review Research, the two companies make up more than 66 percent of the United States online sports betting volume. If two-thirds of the business is going to a pair of companies, it’s harder for newer operations to make meaningful strides.

Plus, the ability to disrupt market shares for FanDuel and DraftKings is likely even harder than the raw numbers suggest. They frequently combine to make up 75 percent or more of the sports betting volume in many states.

The handle for sports betting in North Carolina probably reflects as much. DraftKings and FanDuel might even have a much larger combined market share. Their business models are most dominant median populated states that don’t have more than half-dozen or so sportsbook options. This describes The Tar Heel State to a T.

To that end, Underdog almost assuredly wasn’t leaving a dent in North Carolina’s market share race. Again, we do not have the specific figures. But if they made up even 8 percent of total bets in the state last year, we’d be legitimately shocked.

All of which renders the prediction-market model the more cost-effective option for them. Since these transactions are federally regulated, Underdog will not be subject to the same fees. Their tax rate is probably lower. They also won’t have to pay a fee to maintain their license.

Will We See Other Sportsbooks Convert to Prediction Markets?

That brings us to, quite literally, our billions-upon-billions-of-dollars question: Is Underdog at the front end of a burgeoning trend?

Many experts are skeptical. While operating sportsbooks in the United States requires more overhead, the payoff is technically greater. Sportsbooks are able to profit as “The House.” If you lose a bet, they acquire every cent that you wagered. Prediction-market profits are more fixed. For now, anyway. These operators make money off transactional fees. The returns vary by the size of what they call a “trade.” But it is usually much lower than a sportsbook receives on a wager they win.

For example, let’s say a North Carolina sports betting operator accepts a $150 wager on the Carolina Panthers to beat the New York Jets. Let’s also say the Panthers lose. In this case, the sportsbook just made $150.

Now look at it through the prediction-market model. If a customer “buys” $150 worth of shares in the Panthers to win and they actually lose, the company accepting that trade only makes a small percentage of that $150.

This difference in earning potential is supposed to favor the sports betting route. And for the time being, that is just what it’s doing. But sportsbooks with smaller market shares could find that following in Underdog’s footsteps actually makes sense. Flat fees will be more appealing to companies that have under 10 percent of a given market share. And if enough operators take this view, it could leave FanDuel, DraftKings and one or two other names as the only companies who deem sports betting viable.

Prediction Markets Won’t Nuke Sports Betting Markets…Yet

Make no mistake, prediction markets upending the sports betting model is an extreme outcome. Even if it comes to fruition, it’s likely a process that unfolds over years.

Still, it must be looked at as a possibility. Because even if only the Underdogs of the world pivot, it leaves the North Carolina sports betting market and other regions with quasi-monopolies on their hands. DraftKings and FanDuel won’t need to have competitive lines or bonuses if they, you know, don’t have other sportsbooks against which to compete.

On top of all that, prediction-market operators are beginning to deploy what amount to in-house investors. These company-backed traders can influence the payouts on given event outcomes, not unlike linemakers for a sportsbook. And beyond that, their successful trades will make more money. If an in-house investor buys $150 worth of shares in the Jets to beat the Panthers, they get all of that money plus the odds-determined payout should Carolina win.

This is all to say: It’s mind-melting to us that Underdog’s shuddering of North Carolina sports betting operations still isn’t receiving a bunch of attention. Perhaps it’s an afterthought data point now. Down the line, though, it could be among the first dominoes to fall as part of a much broader trend.

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