CFTC Proposes Market Maker Ownership Rules as Underdog Agrees to $1.3B Sale to IG Group

The Commodity Futures Trading Commission has proposed new rules addressing a growing conflict-of-interest question in the booming prediction markets industry: what happens when an exchange also owns the market maker trading on it. The proposal lands in the same week that Underdog, the fantasy sports operator turned prediction markets player, agreed to be acquired by British online trading firm IG Group in a deal worth up to $1.3 billion.

Together, the two developments capture just how fast the prediction markets space has grown — and how regulators are racing to catch up with a business model that increasingly blurs the line between sportsbook, exchange, and trading platform.

What the CFTC Is Actually Proposing

The CFTC’s Notice of Proposed Rulemaking targets affiliations between designated contract markets (DCMs) — the CFTC-registered exchanges where event contracts trade — and market makers that share common ownership with those exchanges. According to details of the proposal, the rules would restrict an affiliated market maker’s access to non-public exchange information such as order flow, customer positions, and upcoming rule changes. They would also prohibit that market maker from receiving preferential treatment on fee structures or order-matching priority, and would require separation of personnel, technology, and office space between the exchange and its affiliated trading arm.

One notable distinction in the proposal: an operator can own a market maker that trades on its own exchange, but it cannot also own a proprietary trading firm operating on that same exchange. The CFTC opened the proposal for public comment, continuing a broader push — including a related Advanced Notice of Proposed Rulemaking — to determine how existing core principles and public-interest standards should apply to the rapidly expanding event-contract market.

The timing is notable. Prediction market operators such as Kalshi, Polymarket, and Underdog have all pursued vertically integrated structures, in some cases owning the exchange, the clearing operation, and market-making functions under one roof. Regulators are now weighing whether that consolidation creates the kind of information and execution advantages that CFTC rules are designed to prevent in traditional derivatives markets.

Underdog’s Path to a $1.3 Billion Sale

Underdog’s acquisition by IG Group underscores how central the vertically integrated model has become to the prediction markets land grab. The New York-based company, which built its name in daily fantasy sports before pivoting hard into event contracts, acquired Aristotle Exchange’s CFTC-registered Designated Contract Market and Derivatives Clearing Organization earlier this year. That gave Underdog the full regulatory stack — broker, exchange, and clearing house — alongside in-house market-making, making it one of only three sports-focused operators, alongside Kalshi and Robinhood, to hold all three licenses at once.

IG Group, the London-founded online trading firm, agreed to acquire Underdog for up to $1.3 billion in total consideration. The headline figure includes roughly $1.1 billion in upfront enterprise value plus an earnout of about $200 million for Underdog shareholders, contingent on the company posting positive EBITDA and net gaming revenue between $533 million and $600 million in 2026. IG’s upfront equity value is expected to land near $963 million, funded through about 24.1 million newly issued IG shares plus roughly $380 million in cash, with IG also repaying approximately $160 million of Underdog’s existing debt at closing.

IG CEO Breon Corcoran said the deal establishes IG as a leader in U.S. prediction markets, calling it one of the most significant opportunities across trading and entertainment. Underdog is expected to continue operating as a standalone brand within IG’s portfolio, retaining its own management team, with the deal expected to close in late 2026 or early 2027 pending regulatory and antitrust approval.

Why This Matters for the Industry

The convergence of these two stories highlights the tension defining prediction markets right now: capital is flowing in fast, valuations are climbing, and operators are racing to control every layer of the transaction chain — but the regulatory framework governing who can own what is still being written in real time. With Underdog now positioned to fold into a publicly traded UK trading giant, and the CFTC actively working to define acceptable ownership boundaries between exchanges and their market makers, the next year should clarify how much structural consolidation the agency will actually allow. For bettors and traders comparing Kalshi vs. Polymarket and other platforms, the ownership structure behind the scenes may soon matter as much as the odds themselves.