.svg)
FanDuel took a major step toward entering the surging prediction-market space on Wednesday (August 20), announcing a partnership with the largest derivatives exchange operator in the U.S.
The Flutter-owned brand announced a partnership with CME Group, which operates the Chicago Mercantile Exchange, the New York Mercantile Exchange, and several other major derivative exchange markets.
According to a joint statement from the two companies, the pair will develop “new fully funded event-based contracts with defined risk” enabling customers to weigh in on “a wide range of markets with simple ‘yes’ or ‘no’” positions.
At least initially, those markets are set to focus on more traditional financial indices, such as the S&P 500 and Nasdaq markets, oil and gas prices, gold, cryptocurrencies, and economic indicators such as the Gross Domestic Product (GDP) and Consumer Price Index (CPI).
Those markets, the companies said, are expected to launch later this year.
Not included in that list of markets, at least initially, are the type of sports-event contracts that have been offered by platforms such as Kalshi and Robinhood and raised the ire of state gaming regulators and Indian gaming tribes.
The companies said further details of additional offerings are to be determined in the coming months.
For both FanDuel and CME, the move marks an interesting half-step into the prediction space rather than a full leap.
With the legal status of sports-event contracts still murky after conflicting rulings by federal judges in lawsuits filed by Kalshi in Nevada, New Jersey, and Nevada, the risk of immediately launching into sports contracts for FanDuel, and potential partners like CME, remains high.
Still, the partnership will allow the companies to begin working together on products that are less likely to draw the ire of state operator regulators and then potentially pivot quickly to offering sports contracts whenever legal clarity permits it.
"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 CEO Amy Howe in a statement.
"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.”
In previous comments, Peter Jackson, CEO of FanDuel parent company Flutter, had touted the idea of using prediction markets to offer more novelty products that would likely fall outside the scope of a regulated U.S. sports betting product, but could be used as a marketing tool to steer players to the core FanDuel sportsbook platform.
"It's big from a marketing perspective, a talkability perspective, but it's not a big driver of revenue,” Jackson said of novelty markets earlier this year. “There's additional content like that, which the prediction markets could allow.”
The legal battle in prediction markets saw another new entrant to the fray this week as Robinhood filed lawsuits in New Jersey and Nevada seeking to block enforcement action by state regulators against the company, similar to lawsuits where Kalshi received favorable rulings earlier this year.
Robinhood began offering sports-event contracts earlier this year through a partnership with Kalshi, but ceased its offering in the two states after receiving cease-and-desist letters from state regulators.
However, the company restored access in the two states earlier this week and filed suit to block any potential enforcement, while announcing that it would begin offering contracts on NFL and college football games.
“Unlike sports betting, where the firm sets a line, event contracts leverage the power and rigor of financial market structure and are offered in a marketplace where buyers and sellers interact to set the price,” the company wrote in a post on its site announcing the new markets.
