Underdog Launches Its Own CFTC-Licensed Prediction Market Exchange — Ending Its Reliance on Kalshi
Underdog, the sports prediction and fantasy operator, launched its own federally licensed prediction market exchange on July 18, 2026, after acquiring two CFTC-registered entities — Aristotle Exchange DCM and Aristotle Exchange DCO — in March. Underdog was the first sports gaming company to offer prediction market access (through Kalshi and Crypto.com) in fall 2025. Going direct gives it full vertical control. The platform has $6.49 billion in cumulative notional volume, putting it third in the market behind Kalshi and Robinhood.
Underdog launched its own CFTC-licensed prediction market exchange on July 18, 2026, completing a transition from distributor to venue operator. The company acquired Aristotle Exchange DCM, Inc. and Aristotle Exchange DCO, Inc. in March 2026 — both CFTC-registered designated contract markets and derivatives clearing organizations — giving it the regulatory infrastructure to list and clear its own event contracts without routing through a third-party exchange. Before the launch, Underdog had offered prediction market access through partnerships with Kalshi and Crypto.com, making it the first sports gaming operator to bring prediction market trading directly into its app when those partnerships went live in fall 2025.
The move matters competitively because Underdog's user base is built around sports. The company grew as a best-ball fantasy sports platform — a format that skews toward engaged sports fans who follow rosters, injury reports, and game dynamics rather than casual bettors. That audience maps naturally onto sports event contracts: they already have the information advantage that prediction market theory says should produce efficient prices. By owning the exchange rather than relying on Kalshi's market structure, Underdog keeps the economics of market-making and contract listing in-house and can build sports-specific market designs without negotiating with a competitor. CEO Jeremy Levine framed it directly: 'Prediction markets are largely about sports, and Underdog is the best at sports.'
The current competitive rankings show how quickly the market is consolidating into distinct tiers. Kalshi leads with $86.5 billion in cumulative notional volume since September 2025, with Robinhood second at $32.5 billion — a figure that reflects both Robinhood's large retail user base and its decision to route World Cup event contracts through its own Rothera exchange starting in June. Underdog sits third at $6.49 billion in cumulative notional, narrowly ahead of Polymarket's US regulated platform at $6.48 billion. DraftKings and FanDuel trail further behind. The rankings illustrate a structural pattern: sports-first platforms are outpacing the crypto-native prediction markets in US regulated notional volume, because the sports-event contract category is where the mass-market user interest actually is.
Underdog's exchange launch is the fifth major CFTC-licensed prediction market venue now active in the US market alongside Kalshi, Polymarket's QCEX, Robinhood's Rothera, and DraftKings. Each of these operators is betting that owning the exchange layer — rather than distributing through someone else's — is necessary to capture the margin and the data that comes with matching buyers and sellers directly. For Kalshi, which was the primary exchange infrastructure partner for most of these operators when prediction markets first scaled in 2025, the pattern represents a systematic reduction of the distribution advantage it held in the sector's early phase. The platforms that once sent Kalshi volume are now building their own exchanges, while Kalshi's own regulatory battles in ten states continue.
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Recent updates
Kalshi's Parlays Drive Back-to-Back $5B Days — and Hand Critics Their Strongest Argument
Kalshi traded a record $5.33 billion on November 7 and $5.36 billion on November 8, with multi-leg parlay-style 'combos' making up roughly 75% of both days' volume. Its 30-day volume topped $100 billion. But the parlay dominance cuts against the platform's legal defense: parlays are a quintessential sportsbook product, and the American Gaming Association has told the Second Circuit that parlays make up about two-thirds of Kalshi's volume and should be treated as sports bets. The implied house edge on 10-plus-leg combos is around 25%, undercutting the argument that these are neutral financial instruments rather than gambling.
Cruz Bill Would Require State or Tribal Approval for Sports Contracts — a Bipartisan Legislative Threat Emerges
Senator Ted Cruz, who chairs the Senate Commerce Committee, is preparing a bill that would bar federally regulated prediction markets from offering gambling-tied event contracts, including sports, unless a state or tribal government authorizes them. It would not ban the contracts nationwide but would require platforms to obtain approval jurisdiction by jurisdiction, resembling state-by-state sportsbook regulation. The proposal arrives as Democrats take control of both chambers after the midterms, creating a potential bipartisan reckoning: a Republican committee chair and a newly skeptical Democratic majority both eyeing restrictions on a sector that had relied on federal protection.
CFTC Tells Platforms to Stop Geofencing States — Directly Colliding With State Court Orders
The CFTC issued an interpretation on November 5 of its 'impartial access' core principle, telling regulated exchanges including Kalshi and Polymarket to drop state-by-state geographic blocks within 30 days or explain why they cannot. The demand collides head-on with existing state court orders that require the platforms to geofence: Washington ordered Kalshi to geofence in August, and Michigan ordered it to use licensed geolocation to block the state in September, with a $500,000 daily fine for violations. Chairman Michael Selig framed the interpretation as a uniformity requirement. The platforms are now caught between a federal demand to unblock states and state court orders to block them.