It’s been another busy week in the prediction markets space, as FanDuel struck a partnership with a contract trading platform provider, Robinhood joined Kalshi’s legal battles in Nevada and New Jersey, and multiple sportsbooks and DFS operators are taking steps toward CFTC approval.
FanDuel and CME Group announced on Wednesday a joint venture to “launch new products and expand access to financial markets for millions of FanDuel customers in the United States.”
CME bills itself as the “world’s largest derivatives marketplace.”
“The companies will develop new fully funded, event-based contracts with defined risk,” the press release states. “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.”
The products are expected to launch this year will include stock market indexes such as the S&P 500 and Nasdaq-100, commodity and crypto prices, and economic indicators such as GDP and CPI, with more markets to come.
While any mention of sports event contracts is noticeably absent from the announcement, and sports markets will not be part of the initial rollout, there’s a belief among industry insiders that exchange-based sports trading is exactly what FanDuel and its new partner are ultimately after.
FanDuel, though, may be playing it safe for now, hesitant to annoy states that argue prediction markets are illegally circumventing their sports betting regulations.
Writes Straight to the Point’s Steve Ruddock, “don’t expect FanDuel to be associated with sports contracts until there is some more legal clarity.”
Flutter Entertainment, FanDuel’s parent company, has alluded to its interest in carving out its space in US prediction markets. As owner of BetFair, the world’s largest sports betting exchange, Flutter believes it is well positioned to make the move.
Robinhood sues New Jersey, Nevada
Robinhood, which partners with Kalshi to offer sports event contracts on its financial trading platform, has filed suit in New Jersey and Nevada to obtain temporary restraining orders and preliminary injunctions against the states’ cease-and-desist orders.
Kalshi has already been granted preliminary injunctions in both states.
In its lawsuit, Robinhood tried to disassociate itself from sportsbooks, in context of a recent ruling in Maryland denying Kalshi a preliminary injunction.
“Among other defects with the Maryland district court’s reasoning, the court assumes, wrongly and without analysis, that sports-related contract trading is gambling, and that assumption colors the entire opinion,” the lawsuit reads (via Daniel Wallach).
To many gambling industry observers, that’s a disingenuous argument.
Wallach reports a hearing on Robinhood’s motion for a temporary restraining order against New Jersey is scheduled for Tuesday, August 26th, at 1 p.m. ET. Judge Edward Kiel, who presided over Kalshi’s successful case, will preside. Robinhood’s case in Nevada has been reassigned to Chief Judge Gordon, who handled the Kalshi case in his state, too.
Also on the legal front, add Wisconsin to the list of states in which Kalshi is being sued.
The state’s Ho-Chunk Nation is seeking a preliminary and permanent injunction against Kalshi, claiming the company is illegally operating a sportsbook on the tribe’s lands in violation of the Indian Gaming Regulatory Act (IGRA).
Sportsbooks, DFS operators make moves toward prediction markets
DraftKings, Fanantics, PrizePicks and Underdog have all registered with the National Futures Association (NFA), “an important preliminary step in ultimately obtaining the regulatory approval and licensure necessary to be regulated as a futures and derivatives market by the Commodity Futures Trading Commission (CFTC),” SBC America’s Jessica Welman reported.
These companies are in the early stages of entering the prediction market space, but registration demonstrates a level of interest.
DraftKings had previously applied for a Designated Contact Market license with the CFTC but withdrew the application in April. It has since reportedly been in talks to acquire Railbird Exchange, which has been approved as a DCM and plans to launch its prediction market later this year.
