It is a busy week for PrizePicks. The same day it announced a massive acquisition deal with Allwyn, its subsidiary Performance Predictions II received approval from the National Futures Association (NFA) to be a registered Futures Commission Merchant (FCM).
The green light does not mean that PrizePicks can turn around and start operating the way Kalshi or Crypto.com does in terms of offering their own event contracts. What it does do, however, is set PrizePicks to partner with a Designated Contract Merchant (DCM) like Kalshi to offer sports contracts on its platform that are regulated and overseen by the Commodity Futures Trading Commission (CFTC).
PrizePicks first of several gaming groups to gain NFA approval
“The honor of being the first sports entertainment platform to receive an FCM registration from the NFA is a testament to our industry-leading compliance and consumer protection programs that both the NFA and CFTC demand,” said PrizePicks CEO Mike Ybarra. “Acting Chairman Caroline Pham’s vision for the CFTC promotes innovation while reinforcing the importance of strong regulatory standards. Her leadership has set a thoughtful tone for the agency and our industry.”
PrizePicks is the first gaming organization to obtain NFA approval to work with a DCM. DraftKings, Fanatics and Underdog all have pending approvals with the association, but PrizePicks is the first to get the go-ahead.
The news comes fresh off the announcement that European gaming group Allwyn is purchasing a 62.3% stake in PrizePicks for $1.6 billion. That deal pushes the valuation of PrizePicks to $2.5 billion.
FCM status makes California dreamier
The prediction market news also helps ease some of the pressure created by California Attorney General Rob Bonta’s negative legal opinion on DFS. The opinion deemed all forms of paid daily fantasy to be illegal and Bonta said his office plans to enforce it in the future. California Gov. Gavin Newsom called for Bonta’s office to reach a compromise with operators.
News on enforcement has been quiet since the opinion dropped in July and no major DFS operators have left the state. PrizePicks did switch to peer-to-peer only offerings in California in the wake of the opinion. In August, the company fully flipped to its peer-to-peer Arena product nationwide, ceasing to offer against-the-house games.
If it were to leave California as a fantasy operator, this designation could set them up to continue operating as an FCM in the state. There is a pending lawsuit against both Kalshi and Robinhood in a California federal court, where a group of tribes has sued the firms, alleging they are violating the Indian Gaming Regulatory Act (IGRA) with their products.
Other DFS operators involved in event contract space
Even though Underdog does not have approval from the NFA yet, it is already offering Crypto.com sports contracts in 16 states. It is currently doing so as a technology partner rather than as an FCM.
Fellow DFS company Sleeper was poised to beat PrizePicks across the finish line, but the company alleged the CFTC illegally intervened and stopped its prediction market business, Sleeper Markets LLC, from moving forward despite the NFA allegedly being ready to approve its application.
The group has written to the Office of the Inspector General for both the CFTC and the U.S. Department of the Treasury requesting an investigation into what it says is illegal behavior.
