Underdog Acquires CFTC-Registered Exchange, Will Be Able To Offer Prediction Markets Natively
Roundup: WSJ reports Kalshi, Polymarket might raise at $20B valuations; Polymarket CEO Shayne Coplan talks war markets, Robinhood CEO Vlad Tenev talks prediction markets; Kalshi is headed to Brazil.
Underdog announced it acquired the exchange owned by the operator of PredictIt on Monday, giving it the means to offer prediction markets natively rather than being a pass-through for other exchanges.
The news was first reported by Bloomberg.
Aristotle — owned by John Phillips of PredictIt fame — had won approval as a prediction market under the Commodity Futures Trading Commission in September.
The move gives Underdog a designated contract market and a derivatives clearing organization. Those are two of the registrations needed to offer prediction markets without the need for partnerships. Kalshi, Crypto.com and Polymarket all have DCM and DCO registrations, for example.
Underdog currently offers prediction markets in a relationship with Crypto.com.
From the press release:
Underdog, the fastest-growing private sports company in the U.S., today announced the purchase of Aristotle Exchange DCM, Inc. and Aristotle Exchange DCO, Inc., which are a Commodity Futures Trading Commission (CFTC) registered Designated Contract Market (DCM) and a Derivatives Clearing Organization (DCO), respectively. The acquisition enables Underdog to offer its own federally-compliant prediction market exchange, giving customers even more ways to express their opinions on sports and beyond. Underdog was the first sports gaming operator to offer access to sports prediction markets in its app last September.
“We look forward to working with the CFTC to offer an exchange that brings even more options to enjoy sports to our customers,” said Jeremy Levine, CEO and Co-Founder of Underdog. “We’re in the early innings of what prediction markets can be, especially for sports fans. 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 and create products for sports fans better than Underdog.”
Underdog’s exchange will allow customers to access sports event contracts and more. Underdog currently offers access to prediction markets as an intermediary to other exchanges, and the company will continue to expand its prediction offerings under its own exchange.
It’s the latest example of M&A in the prediction markets space aimed at getting DCM/DCO status:
DraftKings acquired Railbird in October, with plans to launch its native prediction market offering later this year.
Robinhood announced a joint venture with Susquehanna in November to acquire and operate an exchange. That exchange — Rothera — is also scheduled to go live this year.
Prediction markets roundup
Kalshi and Polymarket Are Each Eyeing Roughly $20 Billion Valuations (WSJ): “Kalshi and Polymarket, the two dominant prediction-market companies, have been racing to sign up users. Now both platforms are talking to investors about raising money at around the same eye-popping valuation: $20 billion. Kalshi and Polymarket have each recently had discussions with potential backers about fundraising rounds that would value them near that figure, according to people familiar with the matter. Both were last valued at around half that late last year.
Polymarket Founder Says War Bets Are Facing Growing Resistance (Bloomberg): “Polymarket founder and CEO Shayne Coplan said the prediction market industry’s war-related contracts face growing risks and acknowledged that rising visibility brings “more money, more problems” — a blunt concession from one of the sector’s most prominent figures that its flagship product threatens to become a political liability. Speaking at the MIT Sloan Sports Analytics Conference 2026, Coplan argued prediction markets still serve a genuine informational function but described Iran as ‘complicated’ and said the fog of war breeds misunderstanding.”
“There’s still a lot of resistance to innovation that kind of also seems jarring to begin with,” Coplan said on Saturday. But “that’s what makes it innovative and disruptive.”
You can watch the panel here:
Robinhood CEO Vlad Tenev on Tokenization and Prediction Markets for Everything | Odd Lots (Bloomberg, podcast): “And how is Robinhood thinking about how it will play in the red-hot prediction market space? On this episode, Vlad returns to talk about where things stand, and all of the company's new efforts to give retail traders even more instruments to use.”
Kalshi Teams Up With Brazil’s XP for First International Push (Bloomberg): “Prediction market platform Kalshi Inc. is expanding outside the US for the first time, partnering with Brazil’s XP Inc. to list event contracts. Kalshi will start offering yes-or-no contracts tied to Brazil’s economy, on events such as changing inflation and interest rates in the country, co-founder Luana Lopes Lara said. Those contracts will be available for Kalshi’s US investors and select XP users in Brazil, according to executives.”
“It makes sense for us to go through these international partners,” said Lopes Lara, who is from Brazil. “They already have the customers, they have the brand.”
2 young billionaires are behind the prediction market boom. They hate each other (NPR): “There’s one word Kalshi CEO Tarek Mansour is loath to say: Polymarket. Like a politician swiping his never-to-be-spoken-of challenger on the campaign trail, Mansour will drag the enemy but never name the enemy. Yes, there’s an ‘unregulated, offshore prediction market,’ which is not like Kalshi. Too many people, Mansour says, confuse Kalshi for that ‘non-American, unregulated platform.’”
Iran-related bets on prediction sites scrutinized over ‘death markets’ and possible insider trades (CNN): “Other sizable and well-timed bets, placed mere hours before airstrikes began, correctly predicted that strikes would soon occur, raising questions from critics about whether there was insider trading by government officials or others who knew the war plans ahead of time. It’s now routine for questions like these to arise after major geopolitical events, with the rapid growth of prediction markets like Kalshi and Polymarket, where users bet on everything from elections, sports, business, entertainment, or even the daily high temperature in various US cities.”
Insider Trading Is Going to Get People Killed (The Atlantic): “Ayatollah Ali Khamenei was not, it’s safe to assume, a devoted Polymarket user. If he had been, the Iranian leader might still be alive. Hours before Khamenei’s compound in Tehran was reduced to rubble last week, an account under the username “magamyman” bet about $20,000 that the supreme leader would no longer be in power by the end of March. Polymarket placed the odds at just 14 percent, netting “magamyman” a profit of more than $120,000.”
“Everyone knew that an attack might be in the works—some American aircraft carriers had already been deployed to the Middle East weeks ago—but the Iranian government was caught off guard by the timing. Although the ayatollah surely was aware of the risks to his life, he presumably did not know that he would be targeted on this particular Saturday morning.”
Prediction markets are a national security threat (Responsible Statecraft): “The incentive for prediction market abuse by government officials is, in our view, obvious for at least two reasons. One issue concerns fairness in prediction market operations. Government actors may have more information than most people about domestic and international politics. Officials in the Department of War, for example, could have far more information about whether or not leaders will be deposed, the onset of international conflict, and more.”
“Second, and more problematically, we worry that government officials can use prediction markets for personal gain, at the expense of national security. People with the power to influence international affairs could alter their actions in order to make a profit on a prediction market. If, for example, a government official in the Department of War had been invested in the market predicting when President Maduro would be captured, or when the U.S. might strike Iran, they might have altered the timing of the operation in order to make a profit.”
Kalshi sued over ouster of Iran leader prediction market (Reuters): The Kalshi prediction market was sued for failing to pay $54 million to people who bet that Iranian Supreme Leader Ayatollah Ali Khamenei would leave office before March 1, according to a class-action lawsuit filed on Thursday.
Women Wanted: Kalshi Pushes to Expand Far Beyond Sport Bets (WSJ): “Kalshi is looking to reach beyond its base of young men by offering bets on everything from politics to the economy to pop culture. The efforts are paying off; the company says women now account for 26% of users on its platform, up from 13% 10 months ago.”
“Ten years from now, I think the breakdown of the population on Kalshi is going to be a matchup of the breakdown of the population in the U.S.,” Kalshi co-founder Luana Lopes Lara said in an interview."
Prediction markets have a teen gambling problem (Quartz): “Prediction market platforms are in blockbuster mode in early 2026, as Wall Street analysts point to a disturbing trend: teenage gamblers. Truist analyst Barry Jonas notes that 18-to-20-year-olds, mostly blocked from gambling in the U.S., are pivoting to prediction platforms like Kalshi, and betting on everything from college basketball to Donald Trump’s next Federal Reserve pick. The data backs up that sentiment. Jonas, citing data from HoldCrunch, noted that the prediction market platform, often favored by younger wagerers thanks to looser age restrictions, takes more bets on college sports than on pro sports.”
Majority of Exchanges and Venues Now Eye Prediction Markets, Acuiti Finds (press release): “Almost 50% of traditional derivatives exchanges are considering launching prediction contracts, a study from Acuiti has found. The Race to Build Prediction Markets, published today, surveyed senior executives at traditional and crypto exchanges, as well as betting companies, on their plans to develop prediction markets and approaches to the technology investment required to launch. The report finds that the number of venues offering prediction markets is set to grow significantly across the globe as firms look to develop event contracts. The range of contracts is also set to grow as venues develop locally referenced contracts.”
Download the full report here: https://www.acuiti.io/insights/
Prediction Markets: Current Threat, Future Opportunity? (Bloodhorse): “While there was some talk of a potential beneficial agreement down the line, for now an expert panel's consensus on prediction markets is that the industry should protect itself through a unified approach, including litigation if necessary.”
Is there enough room in the market for every operator currently pursuing DCO/DCM status without fractionalizing liquidity across many exchanges?
That’s the part I’m not understanding.