The announcement from FanDuel that it will open a prediction market platform later this year has Wall Street excited and full of questions.
Financial analysts said the joint venture between FanDuel and CME Group likely reshapes the relationship between sportsbooks and the fast-growing federally regulated space, but raises speculation about how regulators and rivals might respond.
FanDuel’s announcement of an event contracts trading platform comes about seven months after Kalshi and Robinhood began offering sports-related event contracts nationwide. It marks the first US sportsbook to announce a prediction product with contracts tied to the S&P 500, the price of oil and gas, cryptocurrencies and other financial benchmarks.
Sports contracts were explicitly excluded from the announcement, but analysts believe that won’t last for long.
FanDuel sets up a starting point
Citizens analyst Jordan Bender described the move as FanDuel “putting its foot on the starting line if sports contracts are deemed suitable to offer” by federal regulators.
Nevada and New Jersey have sued to block sports event contracts, arguing they amount to unlicensed sports betting. Most judges have so far allowed platforms like Kalshi to keep operating as cases play out, deferring to the CFTC as the ultimate authority over what contracts can be listed, with the exception of Maryland.
Outside of briefly asking Robinhood to pull its first sports markets before the Super Bowl and then abruptly canceling a planned roundtable meant to clarify the issue, the CFTC has been radio silent despite repeated pleas from pro sports leagues, trade groups and lawmakers.
“The message is now loud and clear that in the event sports contracts are not made illegal by the CFTC, FanDuel is building the framework and infrastructure for an exchange long term if allowed at the federal level,” Bender said.
NFL spreads in all 50 states?
Truist analyst Barry Jonas echoed Bender, saying the absence of sports at launch “should set them up to turn on that switch at some point should they choose,” especially as state tax rates rise and competitors like Kalshi push deeper into sports.
Turning that switch would seemingly allow FanDuel to offer spreads on NFL games in 50 states, regardless of betting laws, as Robinhood and Kalshi will this fall.
“The floodgates are open,” Bender said.
FanDuel weighs tribal, regulatory considerations
Both analysts cautioned that FanDuel will need to balance federal opportunities with state-level politics.
Until now, FanDuel and other licensed operators have largely refrained from gray-area products like player vs. house daily fantasy sports or sweepstakes casinos, gambling adjacent offerings that many states are now cracking down on.
Jonas warned sportsbooks should be careful “not to upset state gaming regulators and partners in their core business today,” adding that federal views on prediction still have the potential to shift.
That tension is already on display in California, where tribes are suing Kalshi already for allegedly offering unlicensed gambling. At the same time, FanDuel and other sportsbooks are working with California tribes on a 2026 sports betting framework, still nursing wounds from a failed 2022 ballot push that tribes helped crush.
Could sportsbooks gain leverage in California?
FanDuel’s move could provide new leverage after years of frustration at the state level, in Bender’s view.
“Flutter’s announcement only turns up the heat for tribes and parties opposed to sports betting,” he wrote, adding that federally regulated prediction markets may give FanDuel an immediate entry point to California, whether or not tribes consent.
Burning business questions
Bender compared the structure of FanDuel’s joint venture to Robinhood’s arrangement with Kalshi, where funds flow to a third-party exchange that handles clearing.
But key questions remain about how the venture will make money, what the transaction fee structure will look like, and whether FanDuel itself will provide liquidity. Robinhood earns $0.01 per dollar traded on Kalshi, while Kalshi makes money separately from exchange fees. No such details have been disclosed for the FanDuel-CME venture.
FanDuel parent Flutter also owns Betfair, the world’s largest betting exchange, but US laws restricting betting-style exchanges under derivatives rules made a direct transplant impractical. CME, with its history of electronic trading, major mergers, and regulated clearing operations, seemingly provides the cover and compliance that Betfair could not.
Analysts were also keen on the potential for cross-sell and wallet integration across FanDuel’s products, which would differentiate the exchange from Kalshi’s.
“We believe the least amount of friction would be a one-stop shop and seamless wallets if it looks to pair its liquidity pool and sports betting,” Bender wrote, calling wallet functionality “one of the largest hurdles to minimize friction.”
DraftKings and the competition
FanDuel’s position as the U.S. market leader means competitors are expected to follow.
A new DraftKings filing was approved by the NFA in June, with CEO Jason Robins and CFO Alan Ellingson listed as principals. The filing shows DraftKings applied to become both a “swap firm” and an “introducing broker.” DraftKings has also been linked to acquisition talks with Railbird Exchange, an upstart that recently gained federal licensure.
Underdog and PrizePicks have also filed with the NFA, signaling a broader wave of operators preparing for event contracts.
“We look now for DKNG to make a similar move,” Jonas said.
