Underdog is moving deeper into prediction markets after buying two federally regulated exchange entities, a step that will allow the sports gaming company to operate its own U.S. marketplace for event-based contracts.
The New York-based firm said Monday (March 9) it acquired Aristotle Exchange DCM, Inc. and Aristotle Exchange DCO, Inc., both registered with the U.S. Commodity Futures Trading Commission. Together, the licenses create the regulatory framework needed to run a derivatives-style exchange.
One entity holds approval as a Designated Contract Market, meaning it can list and facilitate trading in derivatives contracts. The other is registered as a Derivatives Clearing Organization, which manages the clearing and settlement process that ensures trades are finalized and obligations between parties are met.
By bringing those capabilities under its own umbrella, Underdog plans to build a federally compliant prediction market platform where users can trade contracts tied to sports outcomes and other real-world events.
Underdog expands into prediction markets via regulated Aristotle exchange
Underdog launched in 2020 and quickly gained traction in the U.S. sports gaming industry through fantasy sports contests, media content, and newer prediction-style products. Last September, the company began offering access to sports prediction markets inside its mobile app, but the system worked as a gateway that routed users to outside exchanges rather than running the marketplace itself.
The newly acquired licenses open the door for Underdog to operate its own exchange infrastructure. Instead of relying on third parties, the company would be able to list contracts directly and clear transactions through its own regulated entities.
Jeremy Levine, CEO and co-founder of Underdog, said the company plans to work closely with regulators as the exchange takes shape.
“We look forward to working with the CFTC to offer an exchange that brings even more options to enjoy sports to our customers,” Levine said.
He added that the firm sees prediction markets as a growing way for fans to engage with sports beyond traditional betting or fantasy contests.
“We’re in the early innings of what prediction markets can be, especially for sports fans,” Levine said. “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 and no company knows how to engage with sports fans and create products for sports fans better than Underdog.”
Prediction markets allow people to buy and sell contracts linked to the outcome of real-world events. Prices move as traders signal their expectations about whether something will happen. When structured as regulated derivatives contracts, the markets fall under federal commodities oversight rather than traditional sports betting rules.
Underdog has already been expanding its presence in the space. The company recently partnered with Crypto.com to support access to sports-related prediction markets in multiple U.S. states through its app.
At the same time, the company has been criticized for reshaping its operations as it grows. Underdog recently cut a portion of its workforce as it refocused resources on key areas including regulated products and long-term platform development.
Financial terms of the Aristotle acquisition were not disclosed.
Featured image: Underdog
