Underdog is moving deeper into prediction markets after acquiring a federally regulated exchange and clearinghouse from Aristotle.
The fantasy sports operator announced Monday that it purchased Aristotle Exchange DCM, Inc. and Aristotle Exchange DCO, Inc., entities approved by the Commodity Futures Trading Commission (CFTC) in September 2025 as a Designated Contract Market (DCM) and Derivatives Clearing Organization (DCO). The acquisition gives Underdog the regulatory infrastructure needed to directly list and clear event-contract markets in the United States.
Underdog entered the prediction-market sector last year through a partnership with Crypto.com’s CFTC-regulated derivatives exchange, Crypto.com Derivatives North America (CDNA), which lists the sports event contracts traded through the Underdog app. Owning its own exchange would allow Underdog to bring those markets in-house.
The exchange entities were previously owned by Aristotle, the parent company behind PredictIt, a long-running academic political prediction market platform where users trade contracts on election outcomes and other political events. Neither Aristotle nor PredictIt were part of the acquisition.
Underdog signals sports-first prediction market strategy
Underdog’s announcement also suggests the company intends to lean heavily into sports as it builds out its prediction market strategy. In a news release announcing the acquisition, the company framed prediction markets primarily as another way for sports fans to engage with games and outcomes, with only minimal references to markets beyond sports.
“We look forward to working with the CFTC to offer an exchange that brings even more options to enjoy sports to our customers,” Jeremy Levine, Underdog’s CEO and co-founder, said in the release. “We’re in the early innings of what prediction markets can be, especially for sports fans.”
The emphasis reflects Underdog’s existing business model. The company built its user base through fantasy sports contests and has positioned its prediction market offerings as a natural extension of that ecosystem, allowing users to trade contracts tied to sports outcomes within the same app.
Sports event contracts have been a major driver of trading volume across prediction market platforms, particularly at Kalshi. Levine acknowledged that dynamic in the company’s announcement.
“The reality is, prediction markets are primarily about sports and no company knows how to engage with sports fans and create products for sports fans better than Underdog,” Levine said.
At the same time, a strong focus on sports may carry risk. Sports event contracts have been among the most closely scrutinized products in the emerging prediction market sector, and several court cases are currently testing whether those markets can operate nationwide. State regulators and gaming industry groups have argued in those cases that sports event contracts function like sports betting, which is traditionally governed by state law, rather than financial markets overseen by the CFTC.
Many sports gaming companies entering the prediction market space have sought to diversify their offerings beyond sports, listing contracts tied to elections, economic indicators, cultural event outcomes and more. If courts ultimately side with those state-level challenges, sports markets could face restrictions in certain states, potentially limiting the reach of platforms that rely heavily on them.
PredictIt to continue operating under current structure
The Underdog acquisition also raises questions about the future of PredictIt, the political prediction market platform operated by Aristotle.
Launched in 2014, the platform allows users to trade contracts tied to political races and government outcomes. PredictIt operates under a no-action letter issued by the CFTC in 2014 that allowed the platform to run as an academic research project affiliated with New Zealand’s Victoria University of Wellington rather than registering as a derivatives exchange.
For years, that framework imposed strict limits, including a cap that restricted traders to spending no more than $850 in any single contract and a 5,000-trader limit per market. Those restrictions were loosened last year after a revised no-action arrangement with the CFTC raised the per-contract limit to $3,500 and removed the ceiling on the number of traders allowed to participate in a market. The new $3,500 cap mirrors the federal limit on how much an individual can donate to a political candidate per election cycle, a change that observers say may have been designed to align PredictIt’s trading limits more closely with existing campaign finance rules.
Despite Underdog’s acquisition of the exchange entities, PredictIt itself was not part of the transaction and will continue operating under its existing academic research framework.
Nothing about the platform’s structure appeared to change after Aristotle received DCM and DCO approval last year. PredictIt’s terms of use and FAQ pages still reference its operation under the CFTC no-action framework, and the site states at the bottom of its homepage that “PredictIt.org is an experimental project operated for academic purposes under permission from the CFTC.” PredictIt has also increased its public-facing marketing in the past few months, launching creative campaigns featuring an AI-generated Nostradamus and a tongue-in-cheek “Itoldyousaurus” dinosaur to explain how prediction markets work.
That distinction is notable because many media reports last year suggested PredictIt itself had received regulated exchange status when the CFTC approved Aristotle Exchange as both a DCM and DCO. The approval filings, however, applied to a separate platform, AristotleExchange.com, rather than PredictIt.
Toni Galeassi, PredictIt’s public relations director, confirmed to DeFi Rate that the platform will continue “conducting business as usual.” She said that PredictIt was never part of the Aristotle Exchange regulatory filings or the transaction with Underdog.
“PredictIt and Aristotle Exchange were always intended to be separate platforms,” Galeassi said.
Companies buying their way into prediction markets
Underdog’s purchase of Aristotle’s exchange and clearinghouse reflects a broader pattern emerging in the prediction market sector, with companies acquiring firms that already hold CFTC approvals rather than pursuing those licenses themselves. Obtaining approval to operate a DCM or DCO can take years, making existing regulatory approvals a valuable asset for companies looking to enter the space quickly.
Recent deals suggest the approach is gaining traction. In October 2025, DraftKings acquired Railbird Exchange, a federally licensed derivatives exchange approved by the CFTC to list event contracts. In January of this year, a joint venture between Robinhood and Susquehanna International Group purchased a controlling stake in MIAX Derivatives Exchange, a CFTC-regulated designated contract market and clearinghouse the companies rebranded as Rothera.
Underdog’s acquisition of the Aristotle exchange entities follows the same strategy, allowing the company to step directly into the role of exchange operator rather than navigating the lengthy federal approval process itself. As interest in prediction markets grows, exchanges that secure CFTC approval may increasingly become acquisition targets for companies looking to enter the sector quickly.
