There have been plenty of whispers about sportsbooks potentially stepping into the world of event contracts and prediction markets, but FanDuel shouted it from the rooftops on Wednesday.
The U.S. market-leading sportsbook announced on Aug. 20 that it has partnered with derivatives marketplace CME Group to form a new joint venture that will allow customers to trade on event contracts.
CME Group is a Chicago-based financial services company that labels itself as the world’s leading derivatives marketplace. It operates several exchanges including the Chicago Mercantile Exchange, as well as the Chicago Board of Trade, New York Mercantile Exchange and the Commodity Exchange. It also owns 27% of S&P Dow Jones Indices.
Together, it and FanDuel will operate a non-clearing Futures Commission Merchant (FCM) that will facilitate access to event-based contracts through FanDuel, and will develop new event-based contracts that allow customers to trade on outcomes.
The new offering is expected to launch later this year on CME Group exchanges and the new joint venture FCM, pending regulatory review by the Commodity Futures Trading Commission (CFTC). “Customers will be able to express their views multiple times a day on a wide range of markets with simple ‘yes’ or ‘no’ positions for as little as $1,” read a news release.
No mention of sports… at first
It sounds like the new product from FanDuel and CME will focus on financial products at first. The release cited benchmarks including the S&P 500 and Nasdaq-100, prices of oil and gas, gold, cryptocurrencies and key economic indicators such as GDP and CPI as starting points.
There is no mention of sports in the release, and FanDuel declined to comment further on how the new venture might incorporate sports contracts when asked by SBC Americas.
The press release added that further offerings will be determined in the coming months.
“Partnering with CME Group will unlock our ability to bring even more new and engaging products to FanDuel’s fast-growing customer base,” said FanDuel Group CEO Amy Howe. “We believe there is potentially a wide audience for trading event-based markets and we want to provide a platform that allows our customers to engage in this activity. We are excited to be partnering with CME Group to design new and engaging products, combining innovation with best-in-class regulatory compliance and consumer protections.”
“Individual investors are increasingly sophisticated and continually pursuing new financial opportunities,” said CME Group CEO and Chair Terry Duffy. “To meet this demand, we have created this innovative partnership, which will operate a non-clearing FCM. Together, our event-based products will appeal to the growing public interest in markets, and we will provide education to attract a new generation of potential traders not active in derivatives today.”
Flutter knows what it’s doing
FanDuels’ parent company Flutter has a long history of operating the Betfair Exchange in Europe. CEO Peter Jackson has said multiple times on earnings calls that the Betfair experience gives Flutter and FanDuel a unique edge.
“We have two decades experience of operating the world’s largest betting exchange, which shares similar characteristics with events contracts, and this will help inform our views,” Jackson said on Aug. 7.
He said at the time that Flutter was actively assessing opportunities and potential participation strategies that prediction markets may present for FanDuel. Back in May, he revealed that Flutter had moved some of its Betfair team over to FanDuel to help “evaluate the opportunity.”
In mid-June, a report suggested that FanDuel may be in talks with Kalshi over a partnership, but the company’s General Counsel Erica Okerberg denied that an agreement was in place when speaking before the Nevada Gaming Control Board this month.
Now, FanDuel has found a partner.
Gaming operators begin forming queue?
FanDuel is the first sportsbook to officially announce a planned step into the world inhabited by the likes of Kalshi, Robinhood, Crypto.com and Polymarket, but it likely won’t be the last.
Numerous operator executives spoke publicly in recent months of their keen interest in how the situation develops, and some seem to have made moves.
As reported by SBC Americas on Tuesday, the database of the National Futures Association (NFA) lists filings with ties to sportsbooks DraftKings and Fanatics Betting and Gaming and major fantasy sports operators Underdog and PrizePicks.
Registration with the NFA is an important preliminary step towards becoming an FCM, wherein organizations act as an intermediary between a customer and a trading exchange.
