Underdog Launches Proprietary Prediction Markets Exchange After Aristotle Acquisition

Sandro Brasher

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July 24, 2026

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Underdog, the fantasy sports and prediction markets company, went live with its own proprietary prediction markets exchange on Saturday, cutting ties with third-party operators and taking full control of its trading infrastructure. The launch is the direct result of Underdog’s acquisition of Aristotle Exchange DCM and Aristotle Exchange DCO roughly four months ago, a deal that handed Underdog a regulatory license combination no other sports company currently holds. With a registered futures commission merchant designation already in place, Underdog now operates the most complete prediction market regulatory stack in the U.S. sports industry.

By Sandro Brasher | July 24, 2025

Underdog Goes Live With Its Own Prediction Markets Exchange

From Third-Party Dependency to Full Ownership

Underdog’s prediction markets exchange went live on Saturday, marking the end of a roughly ten-month period during which the company offered sports prediction markets through external platforms. Underdog first launched sports prediction market products in September 2024, partnering with Kalshi and Crypto.com to distribute those markets to users. That arrangement gave Underdog a fast path to market but left the company dependent on infrastructure it did not own, subject to the pricing, terms, and operational decisions of two separate third parties.

The Saturday launch changes that equation entirely. Underdog now operates its own exchange, controls its own order books, and sets its own terms for how prediction markets are listed, settled, and cleared. According to reporting by Legal Sports Report [1], the launch eliminates Underdog’s third-party dependence and represents the culmination of a deliberate, multi-step regulatory and corporate strategy that began with the Aristotle Exchange acquisition.

Vertical integration in financial markets is rarely accidental. For Underdog, owning the exchange layer means capturing margin that previously flowed to Kalshi and Crypto.com, controlling the user experience end-to-end, and building a proprietary data asset from every trade executed on the platform. Those advantages compound over time in ways that third-party distribution agreements never can.

The Aristotle Exchange Acquisition: What Underdog Actually Bought

Four months before the Saturday launch, Underdog acquired two distinct entities: Aristotle Exchange DCM and Aristotle Exchange DCO. The abbreviations matter enormously in the context of U.S. derivatives regulation. DCM stands for Designated Contract Market, the license issued by the Commodity Futures Trading Commission (CFTC) that authorizes an entity to operate a regulated exchange where futures and options contracts can be listed and traded. DCO stands for Derivatives Clearing Organization, the CFTC-issued license that authorizes an entity to clear and settle those contracts.

Holding both licenses simultaneously is rare. Most financial firms that operate in the prediction markets or event contracts space either hold one or the other, or rely on a separately licensed clearinghouse to handle settlement. By acquiring both Aristotle Exchange DCM and Aristotle Exchange DCO in a single transaction, Underdog obtained the ability to list markets and clear them internally, without routing settlement through any external counterparty. That is a structural advantage that took years and significant regulatory effort to build at Aristotle before Underdog acquired it.

Underdog also holds a registered futures commission merchant (FCM) designation. An FCM is a CFTC-regulated entity authorized to solicit or accept orders for futures contracts and accept money or assets from customers in connection with those orders. The combination of DCM, DCO, and FCM registrations makes Underdog the first sports company in the United States to hold what the industry calls a complete prediction market license stack. No traditional sportsbook operator, daily fantasy sports platform, or sports media company currently holds all three designations simultaneously [1].

Why the Full CFTC License Stack Is a Competitive Moat

The Regulatory Barrier Other Sports Companies Cannot Easily Clear

Obtaining a DCM license from the CFTC is not a routine process. Applicants must demonstrate financial resources, operational capacity, compliance infrastructure, and the ability to enforce CFTC core principles across 23 separate regulatory requirements. The DCO designation carries its own parallel set of requirements, including risk management standards, margin methodology documentation, and default procedures. Most companies that want to offer prediction markets in the United States choose to partner with an existing DCM licensee, such as Kalshi, rather than pursue their own license, precisely because the regulatory burden is so high.

Kalshi itself spent years and significant legal resources obtaining its DCM license, including a high-profile legal battle with the CFTC over whether political event contracts qualified as permissible futures products. Polymarket, the blockchain-based prediction market platform that processed over $8 billion in trading volume during the 2024 U.S. election cycle [2], operates outside U.S. regulatory jurisdiction entirely, serving international users while remaining inaccessible to American retail participants through its primary interface. That regulatory gap is precisely the space Underdog is now positioned to occupy with a fully licensed, domestically compliant exchange.

For competitors in the sports and fantasy space, replicating Underdog’s license stack from scratch would require years of regulatory engagement, substantial capital, and the kind of institutional compliance infrastructure that most sports-adjacent companies have never needed to build. The Aristotle Exchange acquisition effectively purchased that moat rather than building it, compressing what might have been a five-year regulatory journey into a single corporate transaction. That strategic logic is worth understanding for anyone tracking how regulated prediction markets develop in the United States over the next several years.

What Underdog’s Exchange Offers That Kalshi and Crypto.com Cannot

Kalshi, founded in 2018 and headquartered in New York, operates as a CFTC-regulated prediction market exchange with a broad range of event contracts covering economics, politics, weather, and sports. Crypto.com, the Hong Kong-based exchange with over 80 million registered users globally [2], offered Underdog’s sports prediction markets as a distribution channel starting in September 2024. Both partnerships gave Underdog reach but not control.

Underdog’s proprietary exchange gives the company direct control over contract specifications, fee structures, market-making arrangements, and settlement logic for sports-specific prediction markets. Sports event contracts have unique characteristics: they resolve on fixed schedules tied to game outcomes, they require real-time data feeds from sports data providers, and they attract a user base with deep domain knowledge about the underlying events. A sports-native company operating its own exchange can optimize all of those variables in ways that a generalist platform like Kalshi or a crypto-first platform like Crypto.com cannot prioritize to the same degree.

The prediction markets industry in the United States is still in early formation. Estimates from industry analysts place the addressable market for regulated U.S. event contracts in the tens of billions of dollars annually once the regulatory framework matures [2], a figure that reflects the scale of the traditional sports betting market, which generated approximately $13.7 billion in gross gaming revenue in 2024 according to the American Gaming Association [3]. Underdog is positioning itself to capture a meaningful share of that transition from traditional sports wagering to CFTC-regulated prediction markets.

Underdog’s Strategic Pivot: From Sportsbook to Prediction Exchange

The North Carolina Sportsbook Shutdown Signals a Clean Break

Underdog’s decision to shut down its North Carolina sportsbook in December 2024 was not a retreat. It was a deliberate strategic reallocation. Traditional sports betting in the United States operates under state-by-state licensing regimes administered by individual state gaming commissions, requiring separate applications, compliance programs, and tax structures in each jurisdiction. That model demands enormous ongoing regulatory overhead and produces margins that have proven difficult to sustain even for well-capitalized operators like DraftKings and FanDuel.

Prediction markets regulated by the CFTC operate under a single federal framework. A company with a valid DCM license can offer event contracts to eligible U.S. participants nationwide without navigating 50 separate state licensing processes. That structural difference in regulatory architecture is a primary reason why Underdog chose to exit the North Carolina sportsbook market and concentrate entirely on the federal prediction markets model. The economics of a single federal license versus dozens of state licenses favor the prediction markets path significantly for a company of Underdog’s size.

The pivot also reflects a broader industry trend. Several operators that entered the U.S. sports betting market between 2018 and 2022 have since scaled back or exited specific state markets as customer acquisition costs proved unsustainable. Underdog’s move is among the most decisive pivots in the sector, abandoning the traditional sportsbook model entirely rather than simply pruning unprofitable states. The company is betting that CFTC-regulated prediction markets represent a structurally superior business, not just a regulatory arbitrage opportunity.

Why the Timing of the Aristotle Acquisition Matters

Underdog completed the Aristotle Exchange acquisition approximately four months before the Saturday exchange launch, suggesting the company spent that intervening period integrating the acquired licenses into its own operational and compliance infrastructure. Building a functional exchange on top of acquired regulatory licenses is not instantaneous: it requires technology integration, compliance program alignment, CFTC notification procedures, and the establishment of market-making relationships to ensure adequate liquidity at launch.

The four-month gap between acquisition and launch is consistent with the operational complexity involved. It also suggests Underdog had a clear product roadmap before the acquisition closed, rather than acquiring the licenses speculatively. That level of pre-acquisition planning indicates institutional seriousness about the prediction markets business that distinguishes Underdog from companies that have explored the space more casually [1].

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What Underdog’s Exchange Launch Means for Crypto and Blockchain Finance

The prediction markets sector sits at a direct intersection of regulated finance and the blockchain-native trading infrastructure that crypto readers know well. Polymarket, the leading decentralized prediction market platform, processed over $8 billion in volume during the 2024 U.S. election period alone [2], demonstrating the scale of demand for event-based financial contracts. Polymarket operates on the Polygon blockchain and uses USDC as its settlement currency, making it inaccessible to U.S. retail users through its primary interface due to regulatory constraints.

Underdog’s fully licensed, CFTC-regulated exchange represents the regulated-market answer to what Polymarket built on-chain. For crypto and blockchain finance readers, the relevant question is whether regulated prediction markets will absorb demand that currently flows to decentralized platforms, or whether the two markets will develop distinct user bases. The evidence from traditional finance suggests that regulated and unregulated versions of the same product often coexist, serving different risk tolerances and jurisdictional profiles. As we have covered previously, 61% of Americans classify prediction markets as gambling, a perception that shapes both regulatory pressure and user adoption curves for platforms like Underdog’s new exchange.

The broader crypto market context also matters here. Regulated prediction markets that settle in U.S. dollars and operate under CFTC oversight represent a different risk profile than on-chain alternatives, but they serve the same fundamental user desire: the ability to take a financial position on the outcome of real-world events. As blockchain-based financial products continue to mature, the regulatory clarity that Underdog has secured through its DCM, DCO, and FCM designations may become a template that other sports and entertainment companies attempt to replicate. The Aristotle Exchange acquisition demonstrated that buying regulatory infrastructure is faster than building it, a lesson that will not be lost on well-capitalized competitors watching Underdog’s launch closely.

Key Takeaways

• Underdog launched its proprietary prediction markets exchange on Saturday, July 2025, ending its reliance on Kalshi and Crypto.com as third-party distribution partners.
• The launch follows Underdog’s acquisition of Aristotle Exchange DCM and Aristotle Exchange DCO approximately four months prior, securing both a Designated Contract Market license and a Derivatives Clearing Organization license from the CFTC.
• Underdog holds a registered futures commission merchant (FCM) designation, making it the first sports company in the United States to hold the complete DCM, DCO, and FCM license combination simultaneously.
• Underdog first entered prediction markets in September 2024 through partnerships with Kalshi and Crypto.com before building toward full exchange ownership.
• Underdog shut down its North Carolina sportsbook in December 2024, completing a full exit from the state-licensed traditional sports betting model.
• Polymarket processed over $8 billion in prediction market volume during the 2024 U.S. election cycle [2], illustrating the scale of demand that CFTC-regulated platforms like Underdog’s exchange are now positioned to serve domestically.
• The CFTC’s federal licensing framework allows Underdog to serve eligible U.S. participants nationwide under a single regulatory umbrella, avoiding the state-by-state licensing overhead that burdens traditional sportsbook operators.

Frequently Asked Questions

The Bottom Line

Underdog’s Saturday exchange launch is not a product update. It is the completion of a calculated, multi-year regulatory and corporate strategy that repositions the company as a vertically integrated financial exchange operator in the sports prediction markets sector. By acquiring Aristotle Exchange DCM and Aristotle Exchange DCO, securing an FCM registration, shutting down its North Carolina sportsbook, and building its own exchange infrastructure, Underdog has assembled a regulatory and operational foundation that no other sports company currently matches. The sequence of moves, from September 2024 partnership launches through the December 2024 sportsbook exit to the July 2025 exchange launch, reflects a coherent strategic vision executed with unusual discipline for a company operating in a sector still defining its own regulatory boundaries.

The prediction markets sector in the United States is at an inflection point. Regulatory clarity from the CFTC, growing public familiarity with event contracts following the 2024 election cycle, and the demonstrated scale of demand on platforms like Polymarket all point toward significant market expansion over the next three to five years. Underdog has positioned itself at the center of that expansion with a license stack that took years to assemble and will take competitors years to replicate. The company that once offered sports prediction markets through someone else’s exchange now owns the exchange itself. That is a fundamentally different business, and a fundamentally stronger one.

For anyone tracking the convergence of sports, finance, and regulation in the United States, Underdog’s exchange launch is the most structurally significant development in the prediction markets sector since Kalshi won its legal battle with the CFTC. The next question is not whether Underdog can compete. It is how quickly the rest of the industry responds to a sports company that just became a regulated financial exchange.

Sources

1. Legal Sports Report – Reporting on Underdog’s in-house prediction markets exchange launch, Aristotle Exchange acquisition, and FCM registration details.
2. Meta1.io – Coverage of U.S. public perception of prediction markets and industry volume data including Polymarket’s 2024 election cycle figures.
3. American Gaming Association – U.S. commercial gaming revenue data for 2024, including sports betting gross gaming revenue figures.