Underdog has successfully acquired Aristotle Exchange, gaining access to a platform regulated by the Commodity Futures Trading Commission (CFTC) as it intensifies its focus on prediction markets.
This acquisition includes control over a designated contract market (DCM) and a derivatives clearing organization (DCO), enabling Underdog to offer event contracts directly, rather than depending on third-party services. This move is a significant step in the company's strategic transition towards prediction markets.
With this acquisition, Underdog now possesses a CFTC-regulated exchange and clearinghouse, a strategy mirrored by other companies like DraftKings and Robinhood, as the demand for prediction markets continues to rise.
CEO Jeremy Levine emphasized the company's commitment to sports-centric prediction markets, highlighting the sector's potential for growth. He stated, “We’re in the early innings of what prediction markets can be, especially for sports fans.”
Currently, Underdog partners with Crypto.com to offer sports event contracts, but owning DCM and DCO licenses will allow the company to manage and list contracts independently, enhancing its control over pricing, liquidity, and product development.
This acquisition also positions Underdog closer to platforms like Kalshi, a leading CFTC-regulated event contract exchange in the United States.
Part of a Broader Strategy Shift
The acquisition is part of a larger strategic shift for Underdog. In December 2025, the company ceased operations of its sports betting platform in North Carolina and withdrew its application to run a sportsbook in Missouri, marking its exit from the sports betting market.
Underdog has also been restructuring its daily fantasy sports (DFS) operations. Historically reliant on its Pick ’em contests, the company has gradually reduced their availability in several states and now offers them in 15 markets, primarily in states without sports betting.
In states where regulators have raised concerns about Pick ’em contests, such as California and Arizona, Underdog has introduced peer-to-peer options.
Additionally, the company laid off around 125 employees last month, accounting for over 20% of its workforce. Levine attributed the layoffs to the company's shift from a state-specific approach to a national prediction market platform.
The Latest DCM Acquisition
This acquisition underscores the increasing interest in prediction markets within the sports and financial technology sectors. By acquiring an already-licensed platform, Underdog avoids a lengthy regulatory approval process that can take years.
In October, DraftKings acquired Railbird Exchange, while Robinhood, in collaboration with Susquehanna International Group, obtained the prediction market exchange LedgerX. Coinbase also acquired The Clearing Company.
Although these companies have yet to launch their own standalone prediction market platforms, they continue to offer event contracts through partnerships. DraftKings has recently announced plans for a comprehensive “Super App,” and Robinhood intends to introduce Rother in the near future.
The growing interest in this sector is attributed to the fact that prediction markets operate under federal commodities regulation, allowing licensed platforms to offer event contracts nationwide, unlike the state-by-state licensing model used in sports betting. This regulatory advantage has led to significant investments and expansion in the field.