Underdog Launches Its Own CFTC Prediction Market Exchange

Underdog launched its own federally regulated prediction market exchange on July 18, 2026, becoming the first sports company to hold the complete license stack of a Designated Contract Market (DCM), a Derivatives Clearing Organization (DCO) and a Futures Commission Merchant (FCM) under the Commodity Futures Trading Commission (CFTC). The move takes Underdog's fast-growing event-contract business fully in-house, ending its reliance on third-party venues such as Crypto.com and Kalshi and giving the company direct control over how sports contracts are designed, listed, traded and settled.

The launch is the clearest sign yet that the biggest US sports betting and fantasy operators now see CFTC-regulated prediction markets, not just state-licensed sportsbooks, as a core distribution channel. It lands just weeks after DraftKings switched on its own in-house exchange, and it sharpens a fast-moving fight over who controls the trading stack behind sports event contracts.

What did Underdog actually launch?

Underdog launched a wholly owned prediction market exchange, integrated directly into its existing app, that lets users trade sports event contracts on a venue Underdog itself operates. Because the company now owns the DCM (the exchange that lists contracts), the DCO (the clearinghouse that settles them) and an FCM (the intermediary that carries customer accounts), it controls the full economics of every trade rather than paying a partner venue for access.

In its own announcement, Underdog framed the launch as a natural extension of its sports-first brand. "Now with our own exchange, we're going to unlock so much more for sports fans," said Jeremy Levine, Underdog's chief executive and co-founder. "Prediction markets are largely about sports, and Underdog is the best at sports."

What are the key facts?

• First full stack: Underdog says it is the first sports company to hold a complete CFTC prediction market license stack (DCM, DCO and FCM), according to its July 18, 2026 announcement.
• $6.5 billion in volume: Underdog has processed close to $6.5 billion in notional prediction market volume since it entered the category in September 2025, ranking third among US operators, per Casino.org.
• Seven contracts self-certified: The company self-certified seven sports event-contract templates with the CFTC on July 15, 2026, covering markets such as baseball and basketball, as reported by World Casino Directory.

How does the Aristotle Exchange acquisition fit in?

The exchange exists because Underdog bought its way into federal regulation. About four months before the launch, in March 2026, Underdog acquired Aristotle Exchange DCM, Inc. and Aristotle Exchange DCO, the CFTC-registered entities that provided the regulatory foundation for the new venue. Aristotle had been approved by the CFTC in 2025 and also underpins PredictIt, the long-running political prediction market.

Buying an already-registered DCM and DCO is far faster than applying from scratch, which can take years. The Aristotle deal effectively let Underdog inherit a federal license, then bolt on its own FCM registration and sports contract templates to complete the stack.

What are sports event contracts, and how do they work?

Sports event contracts are financial derivatives that pay out based on the outcome of a game or a defined event, rather than fixed-odds bets booked by a sportsbook. On Underdog's exchange the contracts carry a notional value of $1 and trade in a range of $0.001 to $0.999, according to filings summarized by World Casino Directory. A price of, say, $0.60 implies the market sees roughly a 60% chance of that outcome, and the contract settles at $1 if it hits or $0 if it does not.

The structure matters because it is regulated as a derivative by the CFTC rather than as gambling by state regulators. That is the regulatory arbitrage at the heart of the prediction market boom, and also the reason it remains contested.

How does Underdog compare with DraftKings and Kalshi?

Underdog is the latest sports operator to go fully in-house, following DraftKings by only a few weeks. The table below sets out how the leading CFTC prediction venues line up in mid-2026 on the facts each has disclosed.

Operator	Exchange	In-house launch	Disclosed scale
Underdog	Own DCM, DCO and FCM (via Aristotle)	July 18, 2026	Near $6.5bn notional since Sept 2025; ranked third
DraftKings	DKeX (built on Railbird technology)	Late June 2026	$11.3bn in weekly trading volume cited at launch
Kalshi	Established CFTC exchange	Operating (partner and direct)	Market leader by volume in US prediction markets

The common thread is vertical integration. DraftKings dropped Crypto.com and launched DKeX in late June 2026, and Underdog has now done the same by moving off Crypto.com and Kalshi onto its own venue. Owning the stack lets each company capture the trading spread and fees that previously went to a partner.

Where is the exchange available?

Underdog's prediction market is not available everywhere. The product is unavailable in 13 US jurisdictions, including Nevada and Washington, D.C., according to Casino.org. That patchwork reflects both state pushback against federally framed sports contracts and Underdog's own compliance choices as the legal picture evolves.

Why is Underdog doing this now?

Control of economics is the headline reason. By owning the DCM, DCO and FCM, Underdog keeps the revenue that would otherwise be shared with a third-party exchange, and it can design contracts tuned to how sports fans actually engage. Vertical integration also insulates the company from a partner changing terms or exiting the space.

The timing is notable for another reason. Front Office Sports reported that the original Aristotle acquisition came only around 10 days after Underdog laid off more than 125 employees, over 20% of its staff, with cuts reaching fraud operations and customer support. Launching a capital-light, high-margin exchange business fits a company sharpening its focus on its most scalable products.

What are the risks and the regulatory fight?

The biggest risk is legal. Critics, including several state gaming regulators, argue that sports event contracts are gambling dressed up as futures, and there are active disputes over whether they belong under CFTC oversight or state gambling law. Underdog itself flagged that ongoing legal battles over the classification of sports event contracts remain unresolved.

That uncertainty is why availability is restricted in 13 jurisdictions and why the model, however fast-growing, is not yet settled law. A ruling that reclassifies sports contracts as gambling in a major market could force operators to pull products or seek state licenses.

What does it mean for the wider iGaming industry?

For the industry, Underdog's launch confirms that prediction markets have moved from experiment to strategy. With DraftKings, Underdog and others building or buying their own CFTC venues, the sports event-contract category is consolidating into an operator-owned stack that competes directly with traditional sportsbooks for the same customers and the same wagering dollars.

It also raises the stakes for regulators. As more sports betting volume migrates to federally regulated exchanges, the tension between the CFTC's derivatives framework and state gambling regimes becomes harder to ignore, a tension already visible in court, including in the litigation surrounding Kalshi.

Key takeaways

• Underdog launched its own CFTC-regulated prediction market exchange on July 18, 2026.
• It is the first sports company to hold the full DCM, DCO and FCM license stack.
• The venue was built on the Aristotle Exchange entities Underdog acquired in March 2026.
• Underdog has handled near $6.5 billion in notional volume since September 2025 and ranks third among US operators.
• The launch follows DraftKings' DKeX and intensifies the fight over the prediction market stack.

Frequently asked questions

When did Underdog launch its prediction market exchange?

Underdog launched its wholly owned, CFTC-regulated prediction market exchange on July 18, 2026, integrated into its existing app.

What licenses does Underdog hold?

Underdog holds the complete prediction market license stack under the CFTC: a Designated Contract Market (DCM), a Derivatives Clearing Organization (DCO) and a Futures Commission Merchant (FCM). It says it is the first sports company to hold all three.

How did Underdog get its CFTC license so quickly?

Underdog acquired the Aristotle Exchange DCM and DCO entities in March 2026, inheriting an existing federal registration rather than applying from scratch, then completed the stack with its own FCM registration and self-certified contracts.

How is this different from a sportsbook?

A sportsbook books fixed-odds bets under state gambling licenses. A prediction market lists event contracts that trade like derivatives and settle at $1 or $0, regulated by the CFTC rather than by state gaming law.

Is Underdog's exchange available in every state?

No. The product is unavailable in 13 US jurisdictions, including Nevada and Washington, D.C., reflecting the unsettled legal status of sports event contracts.

Updated July 2026. Sources: Underdog, Casino.org, Front Office Sports.