Underdog Acquires Aristotle Exchange To Bring Prediction Markets In-House
Underdog is transferring deeper into prediction markets after buying a federally regulated change and clearinghouse from Aristotle.
The fantasy sports activities operator introduced Monday that it bought Aristotle Exchange DCM, Inc. and Aristotle Exchange DCO, Inc., entities authorised by the Commodity Futures Trading Commission (CFTC) in September 2025 as a Designated Contract Market (DCM) and Derivatives Clearing Organization (DCO). The acquisition provides Underdog the regulatory infrastructure wanted to instantly record and clear event-contract markets within the United States.
Underdog entered the prediction-market sector final yr through a partnership with Crypto.com’s CFTC-regulated derivatives change, Crypto.com Derivatives North America (CDNA), which lists the sports activities occasion contracts traded via the Underdog app. Owning its personal change would permit Underdog to deliver these markets in-house.
The change entities have been beforehand owned by Aristotle, the mother or father firm behind PredictIt, a long-running tutorial political prediction market platform the place customers commerce contracts on election outcomes and different political occasions. Neither Aristotle nor PredictIt have been a part of the acquisition.
Underdog alerts sports-first prediction market technique
Underdog’s announcement additionally suggests the corporate intends to lean closely into sports activities because it builds out its prediction market technique. In a information launch saying the acquisition, the corporate framed prediction markets primarily as one other approach for sports activities followers to interact with video games and outcomes, with solely minimal references to markets past sports activities.
“We sit up for working with the CFTC to supply an change that brings much more choices to get pleasure from sports activities to our clients,” Jeremy Levine, Underdog’s CEO and co-founder, mentioned within the launch. “We’re within the early innings of what prediction markets might be, particularly for sports activities followers.”
The emphasis displays Underdog’s present enterprise mannequin. The firm constructed its person base via fantasy sports activities contests and has positioned its prediction market choices as a pure extension of that ecosystem, permitting customers to commerce contracts tied to sports activities outcomes inside the similar app.
Sports event contracts have been a serious driver of buying and selling quantity throughout prediction market platforms, significantly at Kalshi. Levine acknowledged that dynamic within the firm’s announcement.
“The actuality is, prediction markets are primarily about sports activities and no firm is aware of how one can have interaction with sports activities followers and create merchandise for sports activities followers higher than Underdog,” Levine mentioned.
At the identical time, a robust give attention to sports activities could carry danger. Sports occasion contracts have been among the many most carefully scrutinized merchandise within the rising prediction market sector, and several other court docket circumstances are at the moment testing whether or not these markets can function nationwide. State regulators and gaming trade teams have argued in these circumstances that sports activities occasion contracts perform like sports activities betting, which is historically ruled by state legislation, reasonably than monetary markets overseen by the CFTC.
Many sports activities gaming firms coming into the prediction market area have sought to diversify their choices past sports activities, itemizing contracts tied to elections, financial indicators, cultural occasion outcomes and extra. If courts in the end facet with these state-level challenges, sports activities markets might face restrictions in sure states, probably limiting the attain of platforms that rely closely on them.
PredictIt to proceed working underneath present construction
The Underdog acquisition additionally raises questions on the way forward for PredictIt, the political prediction market platform operated by Aristotle.
Launched in 2014, the platform permits customers to commerce contracts tied to political races and authorities outcomes. PredictIt operates underneath a no-action letter issued by the CFTC in 2014 that allowed the platform to run as an tutorial analysis mission affiliated with New Zealand’s Victoria University of Wellington reasonably than registering as a derivatives change.
For years, that framework imposed strict limits, together with a cap that restricted merchants to spending not more than $850 in any single contract and a 5,000-trader restrict per market. Those restrictions have been loosened final yr after a revised no-action arrangement with the CFTC raised the per-contract restrict to $3,500 and eliminated the ceiling on the variety of merchants allowed to take part in a market. The new $3,500 cap mirrors the federal restrict on how a lot a person can donate to a politician per election cycle, a change that observers say could have been designed to align PredictIt’s buying and selling limits extra carefully with present marketing campaign finance guidelines.
Despite Underdog’s acquisition of the change entities, PredictIt itself was not a part of the transaction and can proceed working underneath its present tutorial analysis framework.
Nothing in regards to the platform’s construction appeared to vary after Aristotle acquired DCM and DCO approval final yr. PredictIt’s phrases of use and FAQ pages nonetheless reference its operation underneath the CFTC no-action framework, and the location states on the backside of its homepage that “PredictIt.org is an experimental mission operated for educational functions underneath permission from the CFTC.” PredictIt has additionally elevated its public-facing advertising and marketing prior to now few months, launching inventive campaigns that includes an AI-generated Nostradamus and a tongue-in-cheek “Itoldyousaurus” dinosaur to elucidate how prediction markets work.
That distinction is notable as a result of many media experiences final yr urged PredictIt itself had acquired regulated change standing when the CFTC authorised Aristotle Exchange as each a DCM and DCO. The approval filings, nevertheless, utilized to a separate platform, AristotleExchange.com, reasonably than PredictIt.
Toni Galeassi, PredictIt’s public relations director, confirmed to DeFi Rate that the platform will proceed “conducting enterprise as standard.” She mentioned that PredictIt was by no means a part of the Aristotle Exchange regulatory filings or the transaction with Underdog.
“PredictIt and Aristotle Exchange have been at all times supposed to be separate platforms,” Galeassi mentioned.
Companies shopping for their approach into prediction markets
Underdog’s buy of Aristotle’s change and clearinghouse displays a broader sample rising within the prediction market sector, with firms buying corporations that already maintain CFTC approvals reasonably than pursuing these licenses themselves. Obtaining approval to function a DCM or DCO can take years, making present regulatory approvals a useful asset for firms seeking to enter the area shortly.
Recent offers counsel the strategy is gaining traction. In October 2025, DraftKings acquired Railbird Exchange, a federally licensed derivatives change authorised by the CFTC to record occasion contracts. In January of this yr, a three way partnership between Robinhood and Susquehanna International Group purchased a controlling stake in MIAX Derivatives Exchange, a CFTC-regulated designated contract market and clearinghouse the businesses rebranded as Rothera.
Underdog’s acquisition of the Aristotle change entities follows the identical technique, permitting the corporate to step instantly into the position of change operator reasonably than navigating the prolonged federal approval course of itself. As curiosity in prediction markets grows, exchanges that safe CFTC approval could more and more turn into acquisition targets for firms seeking to enter the sector shortly.
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