Prediction Market Race Heats Up: Underdog Buys CFTC Exchange To Offer Sports Event Contracts
Fantasy sports operator Underdog is making its most aggressive move yet into the rapidly evolving prediction market space. The company announced Monday that it has acquired Aristotle Exchange, a CFTC-regulated entity that includes both a Designated Contract Market (DCM) and a Derivatives Clearing Organization (DCO). Through Aristotle Exchange DCM Inc. and Aristotle Exchange DCO Inc., the deal effectively gives Underdog the regulatory infrastructure needed to launch a federally compliant prediction-markets exchange offering sports-related trades in all 50 states.
The move signals that Underdog - which recently cut more than 20% of its workforce - is preparing to compete directly in a market that is increasingly attracting attention from sportsbooks, regulators, and bettors alike.
“Prediction markets are one of the most exciting developments we’ve seen in a long time,” Underdog CEO Jeremy Levine said in a statement following the acquisition. “We’re in the early innings of what prediction markets can be, especially for sports fans.”
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Prediction Markets Increasingly Focus On Sports
Underdog already dipped its toe into the emerging vertical last year through a collaboration with Crypto.com, becoming the first fantasy sports operator to formally enter the space.
Levine has been clear about where he believes the sector is headed.
“The reality is prediction markets are primarily about sports,” Levine said. “No company knows how to engage with sports fans and create products for sports fans better than Underdog.”
The newly acquired exchange would allow Underdog to offer event-contract style markets, including contracts tied to sports outcomes and other real-world events. That would put the company alongside other operators exploring the model as a complement—or potential alternative—to traditional state-regulated sports betting.
Sportsbooks And Fantasy Operators Racing Into Event Contracts
Underdog’s move comes as the broader sports-betting industry is increasingly experimenting with prediction markets.
Companies such as FanDuel, DraftKings, and Fanatics have all launched or explored prediction-style products in recent months. FanDuel introduced FanDuel Predicts late last year, while DraftKings has been experimenting with its own prediction-market vertical as sportsbooks look for new ways to reach customers in states where traditional wagering remains illegal.
Prediction markets operate under federal commodities law rather than state gaming regulation, creating a regulatory framework that could allow platforms to offer trading nationwide.
That dynamic has sparked an increasingly tense debate between federal regulators and state gaming authorities.
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What Is A Designated Contract Market (DCM) And Why It Matters
The sector may soon receive additional clarity.
CFTC chairman Michael Selig recently said the agency plans to issue guidance on prediction markets “in the very near future,” as the regulator faces mounting pressure to define how event-contract markets should operate.
The debate intensified earlier this year when the CFTC filed a brief in federal court defending its authority over event contracts, arguing that such products fall squarely within federal derivatives regulation.
At the same time, traditional gaming regulators and industry groups have warned that prediction markets could blur the line with sports betting, which has historically been regulated on a state-by-state basis since the fall of PASPA in 2018.
The Early Innings
For companies like Underdog, however, the opportunity is clear.
By acquiring a federally regulated exchange infrastructure, the company is positioning itself for a future where fantasy sports, sportsbooks, and prediction markets increasingly overlap.
And if the regulatory environment ultimately favors the federal event-contract model, operators that establish early footholds—like Underdog—could gain a meaningful head start.
As Levine put it: the industry is still in “the early innings.”
But the race to shape the future of sports-related prediction markets is already underway.
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