The prediction markets arms race continues for betting operators, and FanDuel is ready to hit the ground running next month.
The U.S. market-leading sportsbook’s parent company Flutter announced on Wednesday that it will launch its event contracts trading joint venture with CME Group in December.
The standalone app will be called FanDuel Predicts, and the intention is that its markets will include a range of sports event contracts in states where online sports betting is not legal.
Who could have predicted this?
FanDuel was the first gaming operator to officially announce that it would enter the prediction markets space back in August via the deal with CME Group, a Futures Commission Merchant (FCM) registered with the National Futures Association (NFA) and the Commodity Futures Trading Commission (CFTC).
Since then, a lot has happened. DFS operators Underdog and PrizePicks have partnered with Crypto.com and Polymarket and, most relevantly for FanDuel, its eternal rival DraftKings confirmed last week that it would offer sports trading in non-sports-betting states on its upcoming DraftKings Predictions platform.
Within a week of DraftKings CEO Jason Robins announcing that move, FanDuel made essentially the same announcement on Nov. 12. While Robins said only that DraftKings Predictions will launch “in the coming months,” FanDuel confirmed a more specific timeline for its own entry into the field.
“We can’t wait to bring FanDuel’s proven approach to product innovation into this dynamic sector,” said FanDuel CEO Amy Howe. “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.”
FanDuel offers details on sports contracts
FanDuel gave some specifics about what it intends to offer. While sports were not part of FanDuel’s original announcement of the CME Group joint venture in August, both Flutter and FanDuel personnel subsequently teased that they were on the agenda. Sports will be just one vertical of many, but undoubtedly the headline act.
Subject to appropriate regulatory filings, FanDuel Predicts will allow customers to trade on contracts on football, basketball, baseball and hockey in states where online sports betting is not legal. FanDuel Predicts’ sports contracts will not be available on tribal lands.
FanDuel added that if and when one of those states legalizes online sports betting, it will switch to offering sports wagering rather than continue offering sports contracts.
Flutter intends to be market leader
In his quarterly update comments on Wednesday, Flutter CEO Peter Jackson said that FanDuel Predicts offers “an immediate growth opportunity” beyond state-regulated sports betting and iGaming, particularly given Flutter’s experience of running the Betfair Exchange in Europe.
“We believe this new sports opportunity lies solely in these [non-OSB] states, as prediction markets are having a negligible impact in the states where FanDuel sportsbook is already available to customers,” he said. “FanDuel Predicts will also accelerate acquisition of customers into the FanDuel ecosystem ahead of the state regulation of sports betting.
“We are exceptionally well-positioned to harness this growth opportunity. The opportunity to extend the FanDuel footprint into new states is significant and our aspiration is to be the clear market leader.
“In our existing sportsbook and iGaming states, our primary focus will continue to be the state-regulated market and strengthening our leadership position in our core sports betting and iGaming businesses. In the long-term, we firmly believe that state-regulated sports betting and iGaming remains the most valuable long-term opportunity in the U.S.”
What’s the real risk?
Even while the legality of prediction markets and sport contracts continues to be debated in court, a company with the status, positioning and revenue generation ability of FanDuel was never going to stand by and watch this opportunity pass it by. The question is how to do so without upsetting gaming regulators.
Via memos to gaming licensees and/or cease-and-desist letters to specific operators like Kalshi, states including Illinois, Ohio, Michigan, Arizona and New York have warned that their opinion is that sports contracts are tantamount to illegal sports betting. Some states have warned licensees like FanDuel that even partaking in sports contracts elsewhere in the U.S. could put their in-state licenses at risk, while several regulators and also a coalition of tribes in California are embroiled in legal battles with Kalshi.
FanDuel’s approach of offering sports contracts only where it feels such action does not conflict with state gaming laws or tribal exclusivity is likely an attempt to avoid incurring the wrath of the authorities that hold the keys to its operations in various parts of the country.
As DraftKings’ Robins recently told InGame, “Most of these states haven’t said, ‘You can’t do it anywhere.’ They’ve said, ‘We don’t want you partnering with someone who’s doing it illegally in our state.’ As long as we stick to that, we’ll be fine.”
Jackson added on Wednesday that Flutter consulted closely with state regulators and tribal authorities on its launch strategy, resulting in its “tailored, state-specific approach.”
