FanDuel Secures Partnership With Prediction Market Company CME

Mobile sports betting leader FanDuel has launched its opening salvo into what may ultimately propel it into the world of futures market prediction trading on sporting events via a new joint venture with CME Group to offer financial prediction markets to its sportsbook customers.

Groundbreaking Partnership

FanDuel has cautiously trodden into the world of futures by signing a joint venture partnership with the derivatives exchange CME Group. FanDuel, one of the leading mobile sportsbooks in the United States, will now be eligible to accept contracts on everything from economic, entertainment, and sporting event contracts.

Navigating Regulatory Challenges

However, FanDuel is walking a fine line and is not eager to get into a shouting match with the state regulators who deplore the derivatives exchange companies venturing into their sports betting territory. Therefore, sports contracts will not be offered by the CME Group until further legal clarification is provided.

“The complexity here is managing regulatory relationships and stakeholders,” Jackson said. “When you think about what our primary goal is, it’s about getting to as many states. We can’t let what’s happening in the prediction markets upset that.”

Instead, the products offered 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, with further details of additional offerings to be determined in the coming months.”

Uncharted Territory

Prediction market companies have broken all the rules in their attempt to muscle in on the sports betting market. Although they are not bookmakers, per se, they do offer contracts on the results of sporting events. Traditionally, futures markets were reserved for commodities like gold, silver, and even pork bellies.

However, last November, firms like Kalshi began offering contracts on the outcome of political races and then shifted to the Super Bowl in February. Furthermore, these future market companies are federally governed by the US Commodity Futures Trading Commission (CFTC) and not the state regulators that oversee their mobile sports betting operators.

Rising Tensions with Regulators

That has created a great deal of friction between the regulators, the sportsbooks, and the futures market companies. So much so that the futures market leader, Kalshi, has been sent cease-and-desist letters from the regulatory authorities but has ignored them, leading to legal action that has seen Kalshi score early legal victories.

Even in states that have not launched mobile sports betting, like California and Texas, Kalshi has blithely offered sports events contracts in these markets, which are not available to the likes of FanDuel and DraftKings, et al.

This past April, DraftKings withdrew its application for a futures exchange company with the CFTC, deciding that it may anger state regulators that govern the mobile sportsbooks in their respective states.

Acquisition Rumors and Speculation

Since that time, rumors have persisted that the Boston-based bookmaker is interested in acquiring Railbird, an entity that was recently approved by the U.S. Commodity Futures Trading Commission (CFTC) to operate as a Designated Contract Market (DCM).

When asked to comment on the negotiations, DraftKings said through a spokesperson, “DraftKings speaks to a variety of companies regarding various matters in the normal course of business, and it is our general policy not to comment on the specifics of any of those discussions.”