Underdog Buys Aristotle Exchange Units for Prediction Markets

Underdog, a company that began as a fantasy sports platform, announced Monday that it has acquired the designated contract market (DCM) and derivatives clearing organization (DCO) units of Aristotle Exchange. The move gives the sports gaming operator regulatory infrastructure needed to operate its own prediction market exchange under oversight from the U.S. Commodity Futures Trading Commission (CFTC).

Financial terms of the acquisition were not disclosed. Aristotle will continue to operate the PredictIt platform, a prediction market focused primarily on political event contracts. The deal arrives as Underdog increases its focus on prediction markets and seeks greater independence in offering event contracts to its users.

Acquisition Provides Regulatory Framework for Expansion

The purchase grants Underdog control of a CFTC-registered DCM and DCO. These two registrations are essential for companies that want to list and clear event contracts directly through their own exchange rather than relying on partnerships with outside platforms.

Until now, Underdog relied on a collaboration with Crypto.com to bring prediction markets to its platform. Through that partnership, the company began offering event contract trading last September, becoming the first sports gaming operator in the United States to introduce prediction markets tied to sports outcomes. With the Aristotle Exchange infrastructure in place, Underdog can host those markets itself. The change allows the company to list and settle sports-related event contracts internally rather than depending on another exchange.

Aristotle Exchange received approval from the CFTC in September. The exchange also powers PredictIt, a well-known prediction market that expanded its U.S. activity in the latter half of last year with a focus on political outcomes. PredictIt does not currently offer sports-related contracts.

Underdog CEO and co-founder Jeremy Levine emphasized the potential of prediction markets as the company continues its expansion into the sector. “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 a release cited by InGame.

Strategy Shift Toward National Prediction Markets

Underdog first entered the prediction markets space through its partnership with Crypto.com, listing sports-related event contracts on its app beginning in early September. At launch, those contracts were available in 16 states and covered leagues including the NFL, NBA, MLB, and college football.

Since then, the company has leaned more heavily into the model. Prediction markets are now available in roughly 30 states, including North Carolina and Missouri.

Underdog had a limited presence in traditional sports betting before shifting focus. It shut down its regulated sportsbook operations in North Carolina in December and surrendered its license to operate in Missouri’s newly opened market.

The company also gained approval in January from the National Futures Association to operate as a Futures Commission Merchant. That designation allows Underdog to work with CFTC-authorized exchanges to offer event contracts. By acquiring its own DCM and DCO registrations, the company can expand its prediction market offerings without depending on outside platforms for supply or settlement.

Levine described prediction markets as a natural extension of Underdog’s relationship with sports audiences. “We’re in the early innings of what prediction markets can be, especially for sports fans. We’ll use this opportunity to bring the same relentless focus on innovation and experience that we’ve always brought to our customers. The reality is, prediction markets are primarily about sports,” said Levine in his statement. “No company knows how to engage with sports fans and create products for sports fans better than Underdog.”

Layoffs and Regulatory Scrutiny Surround Expansion

The acquisition follows significant changes inside the company. Less than two weeks before announcing the deal, Underdog conducted layoffs that affected more than 20 percent of its workforce. Reports suggested that around 125 employees were cut across departments such as fraud operations, marketing, customer support, graphics, and the company’s draft-based fantasy games product.

Levine attributed the reductions to a shift in business strategy. In a statement addressing the layoffs, Levine said the company was transitioning from a business focused on a “state-by-state framework to a national prediction-markets platform with seamless offerings across the country.”

Underdog’s approach has also attracted scrutiny from some state regulators. The Arizona Department of Gaming previously issued a cease-and-desist notice to Crypto.com related to sports event contracts. Later, the department moved to revoke Underdog’s daily fantasy sports license in the state, citing concerns that the contracts resembled unlicensed sports betting. Underdog does not currently offer prediction markets in Arizona.

Competition Intensifies in Prediction Markets

The prediction market industry has expanded rapidly over the past year. Platforms such as Kalshi and Polymarket gained attention as interest in event-based contracts grew. Several technology and financial companies have also entered the space, including Crypto.com and Robinhood.

Traditional sports betting operators are experimenting with the model as well. Companies including DraftKings, FanDuel, and Fanatics launched prediction market offerings toward the end of 2025. DraftKings also purchased a registered DCM called Railbird last fall after it received CFTC approval, though the platform has not yet been fully integrated.

Sports event contracts remain controversial. Some state regulators and tribal gaming authorities argue that the products function as gambling under a different regulatory label. Multiple lawsuits have emerged as a result. The federal government’s current administration has indicated support for the sector, and industry observers believe the legal questions surrounding sports event contracts could eventually be decided by the U.S. Supreme Court. For Underdog, the Aristotle acquisition represents a step toward controlling its own exchange infrastructure as the company continues to build a national prediction market platform.