ELMHURST, IL (JLN) — July 31, 2026: IG Group has been trying to predict the prediction market business for nearly two decades. Its record looks like that of a trader who gets in early, loses conviction, sells, buys back, sells again, and then discovers that the market has gone limit-up without him or her.
Now IG is getting back in, this time with both feet, several licenses and up to $1.3 billion.
The story begins with HedgeStreet, the wonderfully named California exchange founded in 2004 to offer small, easily understood derivatives to retail traders. The products were called “Hedgelets,” which sounds like either a financial instrument or something served with mustard at a British garden party.
HedgeStreet was a genuine pioneer. It was the first CFTC-designated contract market built around binary options for retail traders. Its contracts covered such things as mortgage rates, gasoline prices, economic indicators and weather events. These were event contracts before “prediction market” became a phrase capable of adding several billion dollars to a valuation.
IG bought HedgeStreet in December 2007 for $6 million. It rebuilt the platform and relaunched it in 2009 as the North American Derivatives Exchange, or Nadex. Nadex at one time was a partner-level sponsor of MarketsWiki. Additionally, interns from Nadex were regulars at the MarketsWiki Education World of Opportunity series for many years.
IG’s logic in buying HedgeStreet was sound. CFDs and financial spread betting, its bread, butter and occasional jam, were not available to American retail customers. Nadex offered a CFTC-regulated way to provide limited-risk, short-duration products that looked and behaved a great deal like IG’s traditional offerings without triggering the regulatory concerns associated with CFDs and spread betting.
Nadex offered binaries and spreads on stock indexes, foreign exchange, commodities and economic indicators. Then it decided to test the outer boundary.
In December 2011, Nadex self-certified election contracts covering the presidency and control of the House and Senate. The CFTC responded in April 2012 by prohibiting them, declaring that the contracts involved gaming and were contrary to the public interest.
That decision aged about as well as a tuna sandwich left on the dashboard.
The election-contract business did not disappear. It migrated, litigated, innovated and eventually came roaring back through Kalshi, ForecastEx, Crypto.com, Polymarket, Robinhood and others. What Nadex could not get approved in 2012 became one of the hottest financial products in America a little more than a decade later.
IG was not the only exchange operator that had trouble seeing the future of HedgeStreet.
Cboe invested in HedgeStreet and formed a strategic alliance to develop products, provide technology and help with distribution. I was invited to the announcement press conference in Cboe’s offices and was told the investment was $1 million. This was followed by a complete write-off not that long after. Cboe’s annual reports show that the actual adventure was worse: it invested $3.8 million in 2006, received about $300,000 when IG bought HedgeStreet, and recognized a $3.6 million loss.
So much for the wisdom of crowds. Sometimes even exchanges need a prediction market to tell them which prediction market to keep.
By 2021, IG had found a different route into the American derivatives business. It agreed to pay $1 billion for the Tom Sosnoff and Scott Sheridan-created tastytrade, giving it a brokerage, technology and media ecosystem centered on listed options and futures.
With tastytrade in hand, Nadex suddenly looked less essential. In March 2022, IG sold Nadex and its 39.31% interest in the Small Exchange to Crypto.com for $216 million amid the ballooning retail interest in micro contracts. IG called it a significant return on investment and said the proceeds could be reinvested in tastytrade and other opportunities.
That was a perfectly defensible decision, but then so was being short GameStop in 2020. It was also exquisitely timed to precede the explosion in prediction markets.
IG was not finished trading exchange ownership, however. In April 2023, it bought the Small Exchange back from Crypto.com, saying the exchange’s technology and product-development capabilities could support its U.S. retail business.
Then, in October 2025, IG sold the Small Exchange again, this time to Kraken for $100 million. A subsequent regulatory filing said the Small Exchange’s last trade had occurred in January 2025.
Buy HedgeStreet. Rename it Nadex. Sell Nadex. Buy tastytrade. Sell the Small Exchange (acquired via tastytrade purchase). Buy the Small Exchange back. Sell the Small Exchange again. Now buy Underdog, along with another DCM and DCO.
Does IG hold the record for the largest number of exchange purchases and sales? No. ICE and CME Group could fill several bingo cards with the exchanges, clearinghouses and platforms they have acquired over the years.
But IG may hold the record for the greatest number of round trips involving small U.S. retail derivatives exchanges. If there is a commemorative plaque, it should probably have a revolving door mounted on it.
The latest turn came this week.
On July 27, tastytrade launched prediction markets covering Fed decisions, inflation, employment, the VIX, commodities, cryptocurrencies and other financial events. The offering uses Apex Clearing’s FCM infrastructure, allowing tastytrade to distribute event contracts without initially owning the underlying exchange and clearinghouse.
Three days later, IG announced that it would acquire Underdog for up to approximately $1.3 billion.
Underdog began as a fantasy-sports company. It entered sports prediction markets through Crypto.com and Kalshi, then acquired the newly registered Aristotle Exchange DCM and DCO in March 2026. The exchange had yet to begin trading, and Underdog launched it under its own brand in July, giving the company a complete FCM, DCM, and DCO regulatory stack.
Thus, IG, which sold Nadex and Small Exchange for $216 million in 2022, is returning four years later through a transaction valued at up to $1.3 billion.
That comparison is not entirely fair. Underdog is much more than an exchange license. It brings a large fantasy-sports business, millions of customers, a mobile-first brand and a younger demographic than IG traditionally attracts.
Still, the comparison is funny, and I refuse to waste perfectly good irony.
The strategic logic is now much broader than the original Nadex proposition. Nadex was a regulated American substitute for products IG already sold elsewhere. Underdog is a customer-acquisition funnel built around the convergence of sports, entertainment, trading and investing.
Fantasy sports teach customers to make projections. Sports event contracts teach them to price outcomes. Financial event contracts move them from predicting touchdowns and home runs to predicting interest rates, inflation, bitcoin and crude oil. From there, options, futures, stocks and other investments are only a few taps away.
This is not froth in the prediction markets. It is more base building, tying fantasy sports as a feeder to sports betting on prediction markets, which leads to other forms of trading and investing.
