Underdog's Power Play: Acquisition Signals New Era for Sports Prediction Markets

NEW YORK, NY – March 09, 2026

Underdog, the fast-rising sports gaming company, has made a decisive move to transform its role in the burgeoning prediction market industry, acquiring two federally regulated financial exchange entities. The company announced the purchase of Aristotle Exchange DCM, Inc. and Aristotle Exchange DCO, Inc., a Designated Contract Market (DCM) and a Derivatives Clearing Organization (DCO) respectively, both registered with the Commodity Futures Trading Commission (CFTC).

This strategic acquisition shifts Underdog from being an intermediary that offers access to other exchanges to a direct operator of its own federally-compliant prediction market. The move grants the company the power to design, list, and clear its own tradable contracts on sports and other events, a significant step that vertically integrates its operations and positions it for national expansion.

"We look forward to working with the CFTC to offer an exchange that brings even more options to enjoy sports to our customers,” said Jeremy Levine, CEO and Co-Founder of Underdog, in a statement. “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.”

The Regulatory Gauntlet: A Leap into Federal Oversight

By acquiring a DCM and DCO, Underdog is not just buying companies; it is buying into a complex and stringent federal regulatory framework. A Designated Contract Market is an exchange authorized by the CFTC to list futures or option contracts, while a Derivatives Clearing Organization is responsible for the critical back-end functions of clearing trades and managing risk to ensure market integrity.

This brings Underdog directly under the purview of the CFTC and its 23 Core Principles for DCMs, which govern everything from trade monitoring and market manipulation prevention to system safeguards and financial resources. The company now assumes the role of a self-regulatory organization (SRO), tasked with enforcing its own rules and ensuring a fair and transparent market for its users.

The move is particularly bold given the ongoing jurisdictional uncertainty surrounding prediction markets. While the CFTC has asserted its authority, viewing these "yes-or-no" contracts as derivatives, some state gaming regulators continue to classify them as a form of gambling. Underdog's decision to embrace the CFTC framework is a calculated bet on federal oversight becoming the definitive standard, a move that could lend significant legitimacy to its platform and the industry at large. This aligns with the CFTC's own efforts to "plant the flag" as the primary regulator in this space, especially after recent legal and administrative actions have begun to clarify the rules for political and event-based contracts.

A Crowded Field: Reshaping the Competitive Landscape

Underdog enters the direct operator space at a time when the prediction market landscape is becoming both more competitive and more mainstream. It will now compete directly with established CFTC-regulated players like Kalshi, which recently processed over $1 billion in volume during the Super Bowl, and a resurgent Polymarket, which re-entered the U.S. market after acquiring its own licensed exchange.

The field also includes major sports betting giants. DraftKings offers prediction products through its acquisition of Railbird, and Fanatics recently launched its own Fanatics Markets. Underdog's strategy appears to be a direct response to this intensifying competition. Instead of relying on partnerships, as it previously did with Crypto.com, owning the full regulatory stack provides a crucial competitive advantage.

This acquisition is the culmination of a broader strategic pivot for the company. In late 2025, Underdog pulled out of the traditional state-by-state sports betting market and underwent a significant restructuring, including layoffs impacting over 20% of its workforce. At the time, CEO Jeremy Levine framed the changes as necessary for a transition to a national prediction markets platform. This acquisition, backed by the company's recent $70 million Series C funding round that pushed its valuation past $1.2 billion, confirms that prediction markets are now the central focus of Underdog's growth strategy.

From Intermediary to Innovator: The Vertical Integration Play

The purchase of Aristotle Exchange’s registered entities represents a classic vertical integration strategy. By controlling the exchange (DCM) and the clearinghouse (DCO), Underdog gains unprecedented control over its product lifecycle, from conception to settlement. This eliminates reliance on third-party platforms and their associated fees, while also allowing for much faster innovation.

Where the company was once limited by the offerings of its partners, it can now create and list bespoke contracts tailored specifically to its user base of sports fans. This could mean more granular in-game markets, unique player-based outcomes, and creative cross-sport events that are not available elsewhere. This direct control is what Levine alluded to when he stated, "We’ll use this opportunity to bring the same relentless focus on innovation and experience that we’ve always brought to our customers."

The entities acquired from Aristotle provide a turnkey solution. Aristotle Exchange received its CFTC approvals in September 2025, giving Underdog a clean, fully-vetted regulatory infrastructure to build upon. It's important to note that the acquisition did not include Aristotle's well-known political prediction platform, PredictIt, which continues to operate separately. This distinction highlights the surgical nature of the deal: Underdog was not buying a brand, but the essential regulatory machinery required to execute its vision.

Beyond the Spread: The Future of Fan Engagement

Ultimately, this strategic maneuver is aimed at redefining how fans interact with the sports they love. While traditional sports betting focuses on odds and point spreads, prediction markets offer a different form of engagement—one based on expressing opinions on a wide range of potential outcomes. Underdog's stated goal has always been to "make sports more fun," and owning its own exchange is the most powerful tool yet to achieve that.

The company can now directly integrate these new markets into its existing ecosystem, which includes popular fantasy sports games and a growing media network. This creates a flywheel effect where media content can drive engagement with prediction markets, and user activity on the exchange can generate data and storylines for its content creators.

While Levine has emphasized a primary focus on sports, the federal DCM/DCO structure is inherently flexible. The phrase "sports and beyond" in the company's announcement leaves the door open for future expansion into other areas where prediction markets are gaining traction, such as finance, politics, and entertainment. For now, however, the mission is clear: to leverage deep knowledge of sports fans and newfound regulatory power to build the next generation of sports-centric financial entertainment. The success of this ambitious play could set a new standard for how millions of fans engage with sports in the digital age.