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The prediction market landscape is surging as legacy sports betting outlets and gambling startups alike look to capture market share. Underdog is the latest to make a major move, acquiring Aristotle Exchange DCM Inc. and Aristotle Exchange DCO Inc.
The acquisition places the company on a direct path toward launching federally approved prediction markets on its own platform.
Underdog moving toward proprietary exchanges
Underdog launched in 2020 as a “pick ’em-style” daily fantasy sports (DFS) outlet and has grown steadily. Seeing the rise of prediction markets, the acquisition of two Commodity Futures Trading Commission (CFTC) registered Designated Contract Markets (DCMs) and Derivatives Clearing Organizations (DCOs) clears the way for the company to offer its own proprietary markets.
While Underdog currently serves as a pass-through for users to access other exchanges, this acquisition allows the company to host predictions through its own federally compliant exchange.
“We’re in the early innings of what prediction markets can be, especially for sports fans,” said Jeremy Levine, CEO and co-founder of Underdog.
“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 better than Underdog.”
A national strategy for sports fans
Underdog has aggressively reshaped its core products over the last year, including a strategic retreat from the DFS play that was once its primary focus. The company has virtually exited the traditional DFS landscape, now offering its flagship product in only 15 markets.
By acquiring Aristotle, Underdog moves firmly into a prediction market arena that puts it in direct competition with platforms like Polymarket and Kalshi.
In February, the company announced it would lay off 125 employees as part of its continued pivot toward prediction markets. The layoffs reportedly included the bulk of the company’s fraud department. In a statement to Front Office Sports, Levine characterized the layoffs as part of a wider strategy favoring national gaming over state-by-state operations.
“We transitioned our business this year,” Levine said. “We went from a focus on a state-by-state framework to a national prediction markets platform with seamless offerings across the country. It’s simply a different operation, and the changes we made are a part of that transition.”
