Underdog Takes Its Prediction Market Fully In-House

Underdog, the daily-fantasy operator that remade itself into a prediction-market company, has stopped renting the plumbing behind its trades. On July 18, 2026, the New York company launched a prediction-market exchange it wholly owns and operates. The shift lets it collect the trading fees it had been handing to rival exchanges.

Until now, Underdog was a middleman. It listed sports event contracts inside its app but routed the actual trades through outside venues, first Crypto.com and later Kalshi. With its own exchange live, the company now lists and settles those contracts itself, and it does so holding the full set of federal permits. Underdog says it is the first sports company to own what the industry calls the complete license stack: a designated contract market (the exchange that lists the contracts), a derivatives clearing organization (the clearinghouse that settles and guarantees each trade), and registration as a futures commission merchant (the broker that carries customer accounts).

Founder and CEO Jeremy Levine framed the move around sports. “Prediction markets are largely about sports, and Underdog is the best at sports,” he said in the announcement.

Why owning the exchange matters

The economics are the point. Every event contract traded on a regulated exchange carries a fee, and that fee goes to whoever runs the marketplace. For most of the past year, that was Kalshi or Crypto.com. Running the exchange in-house means Underdog keeps that revenue, sets its own fee schedule, and decides for itself which markets to list and how fast to launch them, control it did not have as a partner on someone else’s venue. Its first contracts center on baseball and basketball, and its rulebook makes room for bundling several outcomes into one position, the building blocks of a parlay-style product.

Underdog reached that position by buying its way in rather than applying from scratch. In March 2026, it acquired Aristotle Exchange’s contract-market and clearing entities, which the Commodity Futures Trading Commission had designated a contract market in September 2025. Underdog rebranded the operation as UDX and had already registered as a futures broker earlier in the year, completing the stack. Winning those approvals from the regulator directly can take years; acquiring a firm that already holds them is the shortcut. The deal did not include PredictIt, the political-betting site run by Aristotle’s parent.

A vertical-integration land grab

Underdog is not alone in pulling this infrastructure inside. DraftKings (DKNG ) launched its own exchange, DKeX, in June 2026 on the license it picked up buying Railbird Technologies. A Robinhood–Susquehanna joint venture bought and rebranded a contract market as Rothera, and Polymarket paid $112 million for the holding company behind a licensed exchange to re-enter the U.S. The intermediary model that got operators into prediction markets quickly is giving way to ownership, because the party that owns the exchange keeps the margin.

Underdog brings scale to that fight. By the company’s own count, it has run nearly $6.5 billion in notional prediction-market volume since launching the product in September 2025, third among U.S. operators, ahead of several larger names. It also says it has more than five million registered customers and generates more than $500 million in annual revenue. That built-in audience is the advantage UDX has over exchanges starting cold: the traders are already in the app.

The regulatory fight ahead

The catch is the same one hanging over every sports-focused prediction market. State gaming regulators and tribal authorities argue that a contract tied to who wins a game is sports betting by another name, and that offering it without a state license is illegal gambling, not a federally regulated financial product. Underdog’s markets are already unavailable in 13 jurisdictions, including Nevada and Washington, D.C., and the company walked away from traditional sports betting entirely at the end of 2025 to bet on the national, federally regulated model instead.

The pivot has been costly. Underdog cut more than 125 jobs, over a fifth of its staff, early in 2026 as it moved off a state-by-state betting model toward a national prediction-market platform.

That bet is now being tested in court. Kalshi has spent 2026 fighting state after state over whether its sports contracts can trade without a local license. Michigan ordered it to geofence the state or face daily fines, and the CFTC has stepped in to defend the platforms against state courts. Underdog has drawn less enforcement heat than Kalshi so far, but owning a contract market puts it squarely inside that jurisdictional dispute, which most in the industry expect to reach the Supreme Court. The timing is deliberate: with the NFL season approaching, Underdog now controls the exchange it will need to scale the product through the sport that drives most of the volume.