Underdog has launched its own Commodity Futures Trading Commission (CFTC) regulated exchange to run its prediction market product, taking full control of the trading and clearing that sits behind the markets it offers in its app. The exchange went live on 18 July, four months after Underdog bought Aristotle Exchange to acquire the licences.
The company self-certified its first contracts with the CFTC on 15 July, filing seven sports event-contract templates covering baseball, basketball and broader outcome-based markets. The templates span game-winner, winning-margin and total-score markets, plus a wider format for individual athlete, team or event outcomes, each trading on a $1 notional value between $0.001 and $0.999.
Underdog built its business in daily fantasy sports before a brief move into online sports betting. It entered prediction markets in September 2025 as an intermediary, first routing customers to markets through Crypto.com and later adding contracts from Kalshi. Owning the exchange changes that relationship: Underdog now operates the venue rather than sending order flow to a third party.
The Aristotle acquisition
The licences came through Underdog’s purchase of Aristotle Exchange in March. The deal gave Underdog control of Aristotle Exchange DCM, a Designated Contract Market, and Aristotle Exchange DCO, a Designated Clearing Organisation. Combined with Underdog’s existing registration as a Futures Commission Merchant (FCM), the company said the three licences made it the “first sports company with the complete prediction market licence stack”.
Holding all three parts means Underdog runs the market where contracts trade, clears and settles those trades, and handles customer accounts and margin, without relying on an outside exchange. The company said the proprietary exchange would give customers “even more ways to express their opinions on sports, culture and beyond, all within the existing Underdog app”.
The move mirrors DraftKings, which bought CFTC-regulated exchange Railbird to build out its own prediction markets rather than depend on a partner. Both point to a wider shift among US operators toward owning the regulated infrastructure reshaping US sports betting.
Third by volume
Underdog CEO Jeremy Levine appeared on CNBC following the announcement, where a graphic ranked exchanges by notional trading volume since September 2025. Kalshi led with $86.5bn, followed by Robinhood on $32.5bn and Underdog on $6.49bn. Polymarket US sat just behind on $6.48bn, with DraftKings fifth on $1.2bn.
Underdog’s prediction product is live in 38 US states and Washington DC, including markets without legal sports betting such as Texas, California and Georgia. That reach is central to the appeal of prediction markets for operators: contracts sold under CFTC oversight sidestep the state-by-state licensing that governs sportsbooks.
The company has reshaped itself around the product. Underdog, valued at $1.2bn in a 2025 funding round, made 125 redundancies earlier this year as part of the pivot to prediction markets, which it says need fewer staff to run. It pulled out of the North Carolina online sports betting market and decided against launching in Missouri, despite holding approval to do so.
The hires point the same way. In May, Nick Lundgren, former chief legal officer at Crypto.com and an architect of that firm’s prediction market product, joined Underdog as chief legal officer and said the company was “perfectly positioned” to succeed in the space.
Largely about sports
Levine framed the launch as a bet on sports fans rather than a broader financial product.
“We started this company with a clear belief. There is so much more to be built for sports fans in America. Despite incredible changes in the US market in recent years, through the twisting journey from fantasy sports to regulated sports betting to prediction markets, we still see an industry that far too often simply misses in serving sports fans.”
“Now with our own exchange, we’re going to unlock so much for more sports fans. Prediction markets are largely about sports, and Underdog is the best at sports.”
The “largely about sports” line sets Underdog against the argument Kalshi has pushed for years, that prediction markets are macro-driven financial instruments rather than sports betting by another name. That distinction matters in Washington and in the courts, where the CFTC’s authority over event contracts is being tested against claims that sports markets amount to unlicensed gambling. Underdog is now betting its own exchange, and its regulatory standing, on the sports side of that line.
Source: Underdog
