Underdog, the U.S. sports prediction market and fantasy sports operator, has launched its own federally licensed exchange, marking a shift from intermediary to fully integrated operator. The move follows the company’s acquisition of Aristotle Exchange DCM, Inc. (UDX) and Aristotle Exchange DCO in March 2026, which granted Underdog Designated Contract Market and Derivatives Clearing Organization status under the Commodity Futures Trading Commission (CFTC).

CEO and co-founder Jeremy Levine stated in a press release, “Now with our own exchange, we’re going to unlock so much for more sports fans. Prediction markets are largely about sports, and Underdog is the best at sports.” Levine emphasized that the exchange allows the company to expand offerings for sports, culture, and broader event markets within the Underdog app.

Vertical Integration and Market Control

Previously, Underdog offered prediction markets through third-party exchanges such as Crypto.com and Kalshi. By controlling its own exchange, the company gains direct oversight of contract design, trading rules, and settlement processes. This vertical integration reduces reliance on external venues while maintaining existing partnerships, allowing more flexible product development and financial control.

The exchange’s first filings, self-certified with the CFTC on July 15, include seven sports event-contract templates targeting baseball, basketball, and broader outcome-based markets. These contracts cover game-winner, winning-margin, and total-score markets, along with a broader template for individual athlete, team, or event outcomes. Contracts operate on a $1 notional value, trading between $0.001 and $0.999, with set position limits for participants and market makers.

UDX’s filings, which are self-certifications under CFTC rules, also permit combining multiple entities with AND/OR logic, allowing outcomes to be bundled without using the term “parlay.” While formal trading start dates are pending, the filings signal the company’s intent to list contracts no later than July 17, 2026.

Industry Implications and Future Outlook

Underdog’s launch comes amid a broader trend in the U.S. prediction market sector toward vertical integration. DraftKings recently launched its own DKeX exchange, signaling that operators are increasingly seeking control over their transaction economics and regulatory compliance.

Since September 2025, Underdog has processed nearly $6.5 billion in notional prediction market volume, ranking third among U.S. operators and surpassing several established competitors. The company has also obtained Futures Commission Merchant status, making it the first U.S. sports company with a complete federal license stack for prediction markets.

Levine highlighted that this move responds to growing demand from sports fans for diversified betting and prediction products. The company also intends to extend the exchange to include cultural events and broader outcome markets, aligning with its mission to enhance the user experience across sports and beyond.

Underdog’s full ownership of the exchange positions it to further innovate in regulated prediction markets while maintaining compliance with CFTC requirements. Analysts note that the company’s expertise in daily fantasy sports and sports betting provides a strong foundation to expand market share and influence the evolving regulatory landscape.