Underdog, the innovative sports gaming platform that transformed the daily fantasy sports (DFS) landscape, has officially introduced a fully-owned prediction market exchange. This strategic move allows the company to gain enhanced control over the financial aspects connected to the trading of event contracts.
This announcement follows closely on the heels of Underdog’s recent acquisitions of Aristotle Exchange DCM, Inc. and Aristotle Exchange DCO. These strategic moves set the stage for Underdog’s entry into federally regulated prediction markets. The Aristotle entities functioned as a Designated Contract Market (DCM) and a Derivatives Clearing Organization (DCO), both regulated by the Commodity Futures Trading Commission (CFTC).
“The newly established prediction market exchange, fully owned and operated by Underdog and licensed by the Commodity Futures Trading Commission (CFTC), will offer customers countless opportunities to voice their opinions on sports, culture, and more, all within the current Underdog app,” the company stated.
Regulation by the CFTC is vital for companies like Underdog, as this agency oversees prediction markets throughout the United States.
Rising Trend of Vertical Integration in Prediction Markets
Last September, Underdog launched its prediction market via a partnership with Crypto.com, establishing itself as the first regulated DFS or sportsbook operator to participate in the prediction market arena. In the months that followed, the company secured additional agreements with yes/no exchange platforms.
This approach has been adopted by various gaming and financial service providers within the prediction market sector; however, it is expected that a shift toward vertical integration will occur as more operators recognize its advantages. This trend is already in motion, as exemplified by DraftKings (NASDAQ: DKNG), which recently unveiled its DKeX exchange, enhancing its economic control over transactions on DraftKings Predictions.
By holding both DCM and DCO licenses, Underdog—which is privately held—is distinguished as the first sports company to possess a comprehensive set of prediction market licenses.
“With our private exchange, we’re set to unlock unparalleled opportunities for sports enthusiasts. Prediction markets are primarily about sports, and Underdog excels in this area,” stated CEO and co-founder Jeremy Levine.
Positioning Underdog as a Key Player in Prediction Markets
Given its extensive expertise and background, Underdog is well-positioned to offer sports event contracts and other yes/no derivatives. This positioning has quietly earned the company significant recognition within the industry.
Since its launch last September, Underdog’s prediction market volume has reached nearly $6.5 billion, ranking third among U.S. operators and placing the company ahead of several prominent competitors.
However, it’s worth noting that Underdog’s prediction market is not accessible in 13 U.S. jurisdictions, including Nevada and Washington, D.C.