Underdog Takes Control of Aristotle Exchange to Start Federally Compliant Prediction Market

Key Points

• Underdog completed the acquisition of Aristotle Exchange DCM and Aristotle Exchange DCO and gained CFTC registered exchange and clearing infrastructure.
• The company now places strong attention on sports event contracts within its prediction market offering for its user base.
• This deal allows Underdog to run its own federally compliant prediction market exchange instead of depending on external platforms.

Underdog announced the acquisition of Aristotle Exchange through two entities named Aristotle Exchange DCM Inc and Aristotle Exchange DCO Inc. This transaction gives the sports betting, fantasy and prediction markets operator ownership of a Designated Contract Market and Derivatives Clearing Organisation registered with the Commodity Futures Trading Commission. After purchasing Aristotle Exchange DCM and Aristotle Exchange DCO, Underdog now holds a designated contract market license issued by the Commodity Futures Trading Commission. With that license, the company can operate its own federally compliant prediction market exchange inside the regulatory structure controlled by the commission. The acquisition allows Underdog to stop acting only as an intermediary and start listing and clearing contracts through its own exchange system.

By holding both DCM and DCO registrations, the company gains the regulatory structure needed to operate a prediction market exchange that lists and clears event contracts. Ownership of Aristotle Exchange DCM and DCO also lets Underdog run its own prediction market and clearinghouse instead of depending on other external platforms. Aristotle Exchange DCM and DCO have held their license with the Commodity Futures Trading Commission since September 25, 2025 according to the regulator registry. Through this deal Underdog now gains the ability to operate a standalone prediction market platform that follows federal oversight rules. The company said the exchange will provide access to sports event contracts and other prediction markets while expanding the products available for sports fans.

Strategy Moves Toward Sports Prediction Markets

Underdog started shifting its strategy toward prediction markets during September 2025 as the company prepared to expand its market direction. During that period the company added access to sports prediction markets inside its app and became the first sports gaming operator to provide this capability to users. During the same year the company launched predictions offering through collaboration with Crypto.com which allowed Underdog to host prediction markets on the platform. Commitment toward prediction markets became clear when the company gave up its sports betting license one month before Missouri opened its sports betting market. Through the acquisition of Aristotle exchange entities Underdog now moves away from the earlier partnership model and operates its own exchange and clearinghouse. Underdog said the new exchange will offer access to sports event contracts and other prediction markets while the company continues expanding its offerings.

The company plans to develop prediction market products through its own exchange while creating new products and experiences designed for sports fans. Executives emphasised that sports will remain a central part of the company’s strategy within its prediction market plans. Underdog CEO and co-founder Jeremy Levine pointed toward the role of sports inside the prediction markets ecosystem and expressed belief in the company’s positioning. Levine earlier described prediction markets as a development inside the industry and noted the sector continues to grow and evolve. He stated that prediction markets will move forward and the future direction of prediction markets will centre around sports activity. Levine also said that no company understands engagement with sports fans and product creation for sports fans better than Underdog. After the acquisition announcement on March 9 Levine said the company expects to work with the Commodity Futures Trading Commission to offer the exchange.

The exchange will bring additional options for customers who want to enjoy sports through prediction market activity. Levine also explained that the industry remains at an early stage regarding what prediction markets may become for sports audiences. He added that the company plans to use this opportunity to deliver innovation and customer experience similar to its previous work. According to Levine prediction markets mainly revolve around sports and Underdog believes it can build the strongest sports prediction market product.

Regulation and Market Competition Influence Expansion

The popularity of sports-based prediction markets has increased across the sector and many platforms report growth in user activity. Platforms that combine sports betting and prediction markets including Kalshi and Polymarket have recorded growth in trading participation. During December 2025 sports event contracts represented ninety per cent of Kalshi’s total trading volume. The wider regulatory environment also influences companies that enter the prediction markets sector. Leadership change at the Commodity Futures Trading Commission encouraged companies including Underdog to pursue federally regulated prediction market platforms. CFTC chair Michael Selig said the federal regulator will defend exclusive jurisdiction over prediction markets against challenges from state agencies.

Several state gaming regulators attempted to push platforms including Kalshi Crypto.com Robinhood and Polymarket to remove sports event contracts from their jurisdictions. State agencies claim these event contracts bypass their authority to regulate sports gambling inside state boundaries. Prediction market operators together with the Commodity Futures Trading Commission argue that event contracts represent a form of swap under the Commodity Exchange Act. Because of this claim these contracts fall under the exclusive jurisdiction of the Commodity Futures Trading Commission under federal law. The dispute regarding jurisdiction has now entered courtrooms where classification of prediction market contracts remains contested.

Lawsuits related to the issue currently run across Nevada New Jersey Maryland Massachusetts and Michigan. Protection from the Commodity Futures Trading Commission allows companies that run federally regulated exchanges to bypass state gaming laws and taxes on gross gaming revenues. Meanwhile formal rulemaking for the prediction markets vertical is expected soon according to regulatory discussions. Michael Selig said the Commodity Futures Trading Commission plans to issue guidance for the sector in the near future. Industry operators continue watching the process as prediction markets expand across sports and other event categories. Underdog strategy places the company alongside sports gaming groups such as FanDuel DraftKings and Fanatics seeking engagement across the United States. These companies attempt to reach customers through fantasy sports traditional sports betting and prediction markets. Through the acquisition of Aristotle Exchange entities and related regulatory permissions Underdog plans to expand prediction offerings and increase focus on sports event contracts.