The prediction
markets app targets sports bettors in states where online wagering remains
illegal while offering trades on financial benchmarks.
CME Group
and FanDuel announced plans to launch a prediction markets platform in
December, aiming to blur the traditional boundaries between financial
derivatives and sports betting.
The
partnership pairs the century-old Chicago derivatives exchange with North
America’s largest online gambling operator to offer so-called event contracts
starting at one cent per trade.
The deal
raises questions about why a derivatives marketplace typically serving
institutional clients and sophisticated traders would join forces with a
company built on daily fantasy sports and wagering to launch FanDuel Predicts.
It will
function as a standalone mobile app offering contracts on sports outcomes,
stock indexes, commodity prices, and economic data.
Terry Duffy, CME Group Chairman and CEO, Source: CME
“Our
new event contracts on benchmarks, economic indicators and now sports will
appeal to a new generation of potential participants who are not active in
these markets today,” CME Chairman and CEO Terry Duffy said in a
statement. “This launch will dramatically expand our distribution and
reach, connecting directly with FanDuel’s millions of registered U.S.
users.”
The
question of whether prediction markets still fall under investing or have
already crossed into gambling first
came up for me in April. Since then, the industry has grown rapidly, but
recent moves suggest it is shifting toward the latter.
This is
especially evident when the largest market operator, Kalshi, chooses
a poker legend to help run its platform, and Robinhood introduces contracts
such
as “Will the United States say that aliens exist this year?” These kinds of
wagers resemble gambling far more than investing.
- Trump-Linked Truth Social Set to Become First Social Media Offering Prediction Market Trading
- Kalshi Secures $300M; Plans Crypto Integration with Exchanges and Retail Brokers
In states
where online sports betting remains illegal, users of FanDuel Predict will be
able to trade contracts on baseball, basketball, football and hockey games. The
companies plan to stop offering sports contracts in those jurisdictions once
online betting becomes legal there.
Customers
will also be able to trade contracts tied to the S&P 500, Nasdaq-100, oil
and gas prices, gold, cryptocurrencies, and indicators like GDP and consumer
price data. Stakes range from as little as one cent to 99 cents.
Regulatory Hurdles Cloud
Launch Plans
The venture
operates in a gray area that has drawn federal scrutiny. In September, the
Commodity Futures Trading Commission issued
an advisory warning companies offering sports event contracts to prepare
for potential market disruptions stemming from state-level challenges and
ongoing litigation.
A group of
U.S. senators sent a letter to the CFTC in September challenging the agency’s
oversight of prediction markets, arguing these platforms circumvent state
gambling laws by offering yes-or-no contracts. The lawmakers accused event
contract issuers of avoiding “myriad state laws, including licensing and
background investigations, minimum age requirements, federal anti-money
laundering rules, and consumer protections.”
The CFTC
has not formally approved sports event contracts or determined whether they
violate the Commodity Exchange Act’s prohibition on contracts based on
“gaming.” The agency noted in its advisory that outstanding
litigation “should be accounted for with appropriate contingency planning,
disclosures, and risk management policies and procedures.”
Kalshi, a
prediction market operator, has
been locked in legal battles with both the CFTC and state regulators.
Robinhood suspended its event contracts launch in February, one day after
introduction, following a CFTC request.
Second Attempt at Sports
Market Entry
CME and
FanDuel first
announced their partnership in August, though details remained sparse until
this week. CME has operated event contracts since
September 2022, targeting retail investors with payouts capped at $100 per
contract. The FanDuel collaboration represents the exchange’s largest push to
reach mainstream consumers outside traditional trading circles.
FanDuel has
approximately 17 million customers across all 50 states and operates 25 retail
locations. The company is owned by Flutter Entertainment, which trades on both
the New York Stock Exchange and London Stock Exchange.
FanDuel
plans to extend its consumer protection program to the new app, including
deposit limits, spending alerts, and self-exclusion options. Customers must
complete a “Know Your Customer” verification process that requires
birth date, Social Security number, home address, banking information and valid
identification.
The app
will include educational resources about prediction markets and how to buy and
sell event contracts. Customers can set deposit limits that apply across all
FanDuel products.
“We
can’t wait to bring FanDuel’s proven approach to product innovation into this
dynamic sector,” FanDuel CEO Amy Howe said. “Our partnership with CME
Group allows us to leverage their deep market expertise built over decades
while delivering the seamless, accessible and trusted experience our customers
expect.”
Hot Prediction Markets
And although FanDuel speaks confidently about KYC and
education, the end user is still receiving a product rooted in gambling,
somewhat similar to the now-banned binary options that circulated in Europe
several years ago.
These uncertainties, including regulatory ones, have
not discouraged more companies from joining the accelerating trend. In
November, the cryptocurrency exchange Gemini
announced plans to launch its own prediction markets, and a week earlier a
similar move was made by another
digital-asset platform, Crypto.com.
The
platform is slated to launch in December, subject to appropriate regulatory
filings. Neither company disclosed financial terms of the partnership.
The prediction
markets app targets sports bettors in states where online wagering remains
illegal while offering trades on financial benchmarks.
CME Group
and FanDuel announced plans to launch a prediction markets platform in
December, aiming to blur the traditional boundaries between financial
derivatives and sports betting.
The
partnership pairs the century-old Chicago derivatives exchange with North
America’s largest online gambling operator to offer so-called event contracts
starting at one cent per trade.
The deal
raises questions about why a derivatives marketplace typically serving
institutional clients and sophisticated traders would join forces with a
company built on daily fantasy sports and wagering to launch FanDuel Predicts.
It will
function as a standalone mobile app offering contracts on sports outcomes,
stock indexes, commodity prices, and economic data.
Terry Duffy, CME Group Chairman and CEO, Source: CME
“Our
new event contracts on benchmarks, economic indicators and now sports will
appeal to a new generation of potential participants who are not active in
these markets today,” CME Chairman and CEO Terry Duffy said in a
statement. “This launch will dramatically expand our distribution and
reach, connecting directly with FanDuel’s millions of registered U.S.
users.”
The
question of whether prediction markets still fall under investing or have
already crossed into gambling first
came up for me in April. Since then, the industry has grown rapidly, but
recent moves suggest it is shifting toward the latter.
This is
especially evident when the largest market operator, Kalshi, chooses
a poker legend to help run its platform, and Robinhood introduces contracts
such
as “Will the United States say that aliens exist this year?” These kinds of
wagers resemble gambling far more than investing.
- Trump-Linked Truth Social Set to Become First Social Media Offering Prediction Market Trading
- Kalshi Secures $300M; Plans Crypto Integration with Exchanges and Retail Brokers
In states
where online sports betting remains illegal, users of FanDuel Predict will be
able to trade contracts on baseball, basketball, football and hockey games. The
companies plan to stop offering sports contracts in those jurisdictions once
online betting becomes legal there.
Customers
will also be able to trade contracts tied to the S&P 500, Nasdaq-100, oil
and gas prices, gold, cryptocurrencies, and indicators like GDP and consumer
price data. Stakes range from as little as one cent to 99 cents.
Regulatory Hurdles Cloud
Launch Plans
The venture
operates in a gray area that has drawn federal scrutiny. In September, the
Commodity Futures Trading Commission issued
an advisory warning companies offering sports event contracts to prepare
for potential market disruptions stemming from state-level challenges and
ongoing litigation.
A group of
U.S. senators sent a letter to the CFTC in September challenging the agency’s
oversight of prediction markets, arguing these platforms circumvent state
gambling laws by offering yes-or-no contracts. The lawmakers accused event
contract issuers of avoiding “myriad state laws, including licensing and
background investigations, minimum age requirements, federal anti-money
laundering rules, and consumer protections.”
The CFTC
has not formally approved sports event contracts or determined whether they
violate the Commodity Exchange Act’s prohibition on contracts based on
“gaming.” The agency noted in its advisory that outstanding
litigation “should be accounted for with appropriate contingency planning,
disclosures, and risk management policies and procedures.”
Kalshi, a
prediction market operator, has
been locked in legal battles with both the CFTC and state regulators.
Robinhood suspended its event contracts launch in February, one day after
introduction, following a CFTC request.
Second Attempt at Sports
Market Entry
CME and
FanDuel first
announced their partnership in August, though details remained sparse until
this week. CME has operated event contracts since
September 2022, targeting retail investors with payouts capped at $100 per
contract. The FanDuel collaboration represents the exchange’s largest push to
reach mainstream consumers outside traditional trading circles.
FanDuel has
approximately 17 million customers across all 50 states and operates 25 retail
locations. The company is owned by Flutter Entertainment, which trades on both
the New York Stock Exchange and London Stock Exchange.
FanDuel
plans to extend its consumer protection program to the new app, including
deposit limits, spending alerts, and self-exclusion options. Customers must
complete a “Know Your Customer” verification process that requires
birth date, Social Security number, home address, banking information and valid
identification.
The app
will include educational resources about prediction markets and how to buy and
sell event contracts. Customers can set deposit limits that apply across all
FanDuel products.
“We
can’t wait to bring FanDuel’s proven approach to product innovation into this
dynamic sector,” FanDuel CEO Amy Howe said. “Our partnership with CME
Group allows us to leverage their deep market expertise built over decades
while delivering the seamless, accessible and trusted experience our customers
expect.”
Hot Prediction Markets
And although FanDuel speaks confidently about KYC and
education, the end user is still receiving a product rooted in gambling,
somewhat similar to the now-banned binary options that circulated in Europe
several years ago.
These uncertainties, including regulatory ones, have
not discouraged more companies from joining the accelerating trend. In
November, the cryptocurrency exchange Gemini
announced plans to launch its own prediction markets, and a week earlier a
similar move was made by another
digital-asset platform, Crypto.com.
The
platform is slated to launch in December, subject to appropriate regulatory
filings. Neither company disclosed financial terms of the partnership.
