Underdog acquires Aristotle Exchange to launch sports event contracts
Daily fantasy sports operator Underdog Fantasy has acquired derivatives firm Aristotle Exchange to launch its own sports event contracts.
Underdog said it purchased Aristotle Exchange Designated Contract Market and Aristotle Derivatives Clearing Organization, both regulated by the Commodity Futures Trading Commission.
Until now, the platform listed contracts through an agreement with Crypto.com, which supplied the exchange infrastructure behind Underdog’s initial prediction market rollout in September.
The purchase has allowed the operator to control both the listing and settlement of contracts tied to outcomes in leagues such as the NFL, NBA, MLB, and college football. Aristotle’s exchange framework was approved by the federal regulator in September and currently supports PredictIt, a platform focused on political event contracts rather than sports.
Jeremy Levine, Chief Executive and Co-Founder of Underdog, said, “We look forward to working with the CFTC to offer an exchange that brings even more options to enjoy sports to our customers. We’re in the early innings of what prediction markets can be, especially for sports fans.
“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.”
The acquisition followed workforce reductions announced 10 days earlier, in which at least 125 employees were laid off across fraud operations, customer support, graphics, marketing, and draft-based gaming products.
Charlotte Capewell brings her passion for storytelling and expertise in writing, researching, and the gambling industry to every article she writes. Her specialties include the US gambling industry, regulator legislation, igaming, and more.
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The Backstory
How Underdog arrived at a federally regulated exchange
Underdog’s purchase of Aristotle’s designated contract market and clearinghouse caps a six-month shift from a state-by-state fantasy model to a national, CFTC-supervised exchange strategy. The company piloted sports event contracts last fall through a partner arrangement and then moved to own the infrastructure end to end. That pivot accelerated as prediction markets gained traction and regulatory pressure mounted at the state level, creating both opportunity and risk for operators that could secure federal permissions.
The inflection point came with a rollout of sports event contracts across multiple states last September. Underdog initially routed listings through Crypto.com’s exchange stack, giving the fantasy operator a low-lift entry into event-based trading while it evaluated demand and compliance contours. As competitors sought their own federally overseen footholds, Underdog positioned itself to control listings and settlement by buying Aristotle’s CFTC-licensed venues rather than relying on third parties.
From pilot to platform control
Underdog’s early prediction market offering leaned on a partnership with Crypto.com to stand up the contracts and clearing. That approach gave the company speed but limited control over mechanics that matter in regulated derivatives, including contract design, listing schedules and settlement procedures. Owning Aristotle’s market and clearing entities gives Underdog a vertically integrated path similar to traditional futures venues, with the ability to iterate products for leagues like the NFL, NBA and MLB while keeping risk and compliance centralized.
The move mirrors a wider recalibration among digital gaming and crypto firms that see CFTC oversight as a scalable path for event markets. Operators pursuing federal charters argue that contracts on sports or politics fall under commodities law, not gambling statutes, and therefore can be listed nationally on registered exchanges. That bet on federal preemption has become a strategic hinge as states test their authority to halt or restrict these markets inside their borders.
Restructuring and leadership adds
Underdog trimmed costs ahead of the acquisition, eliminating jobs as it reoriented toward prediction markets and automation. On Feb. 27 the company laid off at least 125 employees, or more than 20 percent of its staff, as it shifted away from legacy drafts products and emphasized AI-enabled operations. Cuts hit customer support, marketing, design and fraud operations while leaders framed the change as a move from a patchwork of state fantasy offerings to a national exchange model.
Weeks later Underdog bolstered its bench with veteran operators. The company hired Rishi Garg as CFO and Kimberly Pointer Corbett as CMO to guide financing, brand and growth as it targeted roughly $500 million in year-five revenue and integrated exchange capabilities. The appointments followed a recent Series C raise led by Spark Capital that valued Underdog above $1.3 billion, signaling investor confidence in the company’s push beyond daily fantasy toward regulated event trading.
A widening jurisdictional fight
Underdog’s exchange bet lands in the middle of an unsettled jurisdictional fight between Washington and the states. Multiple regulators have moved to block or penalize CFTC-regulated platforms for offering sports event contracts to their residents, arguing the products are indistinguishable from sports betting and must comply with state gaming laws. In January a federal judge temporarily blocked Tennessee’s attempt to force Kalshi to stop listing sports contracts, after the prediction market said its federally registered status put it under exclusive CFTC jurisdiction. The injunction highlighted a core question for all operators: does a CFTC charter preempt state gambling restrictions for sports-linked event contracts, or do states retain enforcement power over what they view as wagering?
Industry trade groups are urging Congress to settle it. The American Gaming Association and Indian Gaming Association told lawmakers that sports event contracts are “indistinguishable from legal sports betting” and are expanding into parlays and college portals by exploiting perceived CFTC inaction. Their joint letter presses Congress to address event contracts in broader crypto market structure legislation and to reinforce gambling laws so operators cannot route sports betting through derivatives exchanges. The CFTC’s chairman has said the agency will follow any congressional directive, underscoring the stakes for companies building on federal licensure.
Competitors chase federal rails
Underdog is not alone in seeking federally supervised infrastructure. Crypto exchange Kraken announced a $100 million deal to buy the CFTC-licensed Small Exchange and signaled interest in prediction markets. The acquisition, finalized with IG Group, gives Kraken a path to a U.S.-native derivatives stack under federal oversight. The company said the move lays a foundation for scaled, transparent markets and a full suite of spot, futures and margin trading. The deal comes as firms test whether CFTC-regulated venues can list sports outcomes despite state pushback. Kraken’s purchase of Small Exchange puts it among a cohort exploring that route, alongside ventures like RSBIX, which has applied for a designated contract market license, and PrizePicks, which obtained National Futures Association approval through an affiliate as a precursor to a predictions offering.
Regulators have begun to stake out boundaries. Nevada’s gaming regulator recently clarified it views sports event contracts as wagering even on federally supervised exchanges, a stance that could trigger more cease-and-desist actions or litigation as exchanges add markets and states assert authority. Each enforcement attempt raises the odds of a circuit split or a push for congressional action, any of which could reset business plans for operators betting on federal oversight.
What’s at stake for Underdog
Controlling a CFTC-registered exchange and clearinghouse could give Underdog cost and speed advantages as it designs new markets, manages risk and integrates settlement with its consumer app. It could also diversify revenue beyond fantasy entries, support national product launches without navigating 50 licensing regimes, and deepen engagement with customers who already bet on player performance. But the strategy hinges on regulatory clarity. If courts or Congress decide sports event contracts fall under state gambling laws, Underdog and its peers would need hybrid compliance programs or geofencing that could blunt scale benefits.
In the near term, the acquisition positions Underdog to move faster on product iteration than it could through a third-party exchange, while sending a signal to rivals and regulators that it intends to operate within the federal commodities framework. With lawsuits emerging and trade groups pressing Congress, the company’s next milestones may be less about feature releases and more about where judges and lawmakers draw the line between a futures contract and a bet.
