Only two weeks after Underdog’s sale to the London-based IG Group for $1.3 billion plus $850 million upside in a tiered management incentive plan, the company has a potential legal entanglement on its hands.
By way of background, Underdog purchased Aristotle Exchange DCM Inc. and Aristotle Exchange DCO Inc. in March in order to gain the licenses to run its own federally regulated exchange, focusing on sports markets. The terms of that deal were not disclosed.
Underdog founder Jeremy Levine revealed Thursday that Aristotle Exchange Holding Company 1 filed an action against Underdog in Delaware Chancery Court. The complaint was filed under seal and is not yet publicly available, pending the potential redaction of confidential information, so we can only speculate for now on the nature of Aristotle’s claims.
When Aristotle sold its licenses, the company obtained an undisclosed number of shares in Underdog. And as a result of Underdog’s sale to trading firm IG Group, Aristotle would seemingly be poised to realize a corresponding percentage of the $1.3 billion sale.
Going from Levine’s remarks on X, it looks like Aristotle gained a good number of shares, as the going rate for a DCM and DCO is $100 million. Now, coinciding with the sale to IG Group four months later, a transaction that has not yet closed, Aristotle is bringing various causes of action, including potentially fraud and conspiracy.
Reached for comment about the lawsuit, a representative for Aristotle said, “We believe the filing speaks for itself, and we don’t have any comments outside of what is in the filing.” So we will know more about the underlying factual claims when the complaint surfaces.
Aristotle Inc. is perhaps best known for its platform PredictIt, a real-money exchange launched in 2014 as a nonprofit educational project of the Victoria University of Wellington, New Zealand. Certain trading restrictions applied under terms of a “no action” letter granted to it by the Commodity Futures Trading Commission for the nonprofit project. Aristotle has retained the rights to the PredictIt platform and name.
Even before Underdog procured the DCM and DCO licenses and operated entirely with its own plumbing, the company had leaned heavily into prediction markets, offering a wide range of sports markets initially through a partnership with Crypto.com. According to Ticker Tracker, Underdog’s volume has picked up in August, hovering at about 10 million in notional volume over each of the past five days.
