In a move that paves the way for FanDuel to eventually offer sports prediction markets in the U.S., the sportsbook operator on Wednesday announced a partnership with CME Group, which owns four exchanges registered with the federal Commodity Futures Trading Commission (CFTC).
For now, FanDuel said it will only offer non-sports contracts through a CME Group exchange—a thematic departure from its current suite of athletics and gaming-centered products. The agreement moves FanDuel closer to financial technology companies like Robinhood at a time fintech is pushing itself onto sports betting’s turf. FanDuel’s prediction market contracts will be regulated by the CFTC, the de facto oversight body for derivatives trading. FanDuel’s sportsbook will remain under the watch of states.
Initially, FanDuel’s contracts “will include benchmarks such as the S&P 500 and Nasdaq-100, prices of oil and gas, gold, cryptocurrencies, and key economic indicators such as GDP and CPI,” according to a joint press release from FanDuel and CME Group.
The product will launch later this year, the companies said. Financial terms were not announced. FanDuel has not said whether it will create a new app to house prediction market trading.
For months, U.S. sportsbook operators have said they were monitoring the rise of U.S. prediction markets, which unlike traditional sportsbooks have reached consumers in all 50 states. Until Wednesday, though, their curiosity was outweighed by a fear of upsetting state regulators who are in litigation with prediction market platforms such as Kalshi and Crypto.com. Many states classify sports prediction markets as a form of gambling that should be handled on a state-by-state basis—and banned entirely where sports betting is not permitted beyond tribal exceptions, such as in California and Texas.
FanDuel’s agreement with CME group most closely mirrors the framework of Robinhood. Rather than owning an exchange, both FanDuel and Robinhood act as futures commission merchants (FCMs) underpinned by a third-party exchange. In Robinhood’s case, the third-party exchange is Kalshi. For FanDuel, it will be an exchange owned and operated by CME.
JB Mackenzie, Robinhood’s vice president of futures and international, told Sportico earlier this year that the company does not pay Kalshi directly to use its exchange. Robinhood earns $0.01 per dollar traded, Mackenzie said, with Kalshi earning money from additional fees in a separate process.
FanDuel’s parent company Flutter owns Betfair, a sports prediction market exchange in the UK. However, Betfair does not have any CFTC clearances, and it could have taken years for it to go through a regulatory process to launch it in the U.S.
FanDuel’s partnership with CME provides faster market access for Flutter.
Flutter stock is level in Wednesday after hours trading.
(This story has been updated in the sixth paragraph to remove a reference to pending regulatory approval of the FanDuel/CME agreement.)
