- Report suggests CME Group could offer sports event contracts before the end of 2025
- FanDuel’s role, if any, isn’t yet known
CME Group (NASDAQ: CME), the owner of the Chicago Mercantile Exchange (CME), is reportedly looking to offer sports event contracts by the end of this year, ramping up the exchange operator’s competition with prediction markets rivals Kalshi and Polymarket.
Citing unidentified sources with knowledge of the matter, Bloomberg broke the news earlier today. It’s possible the CME sports contracts will be made available via futures commission merchants (FCMs) and other related platforms, potentially opening the door for retail brokers to offer the derivatives to clients. However, the situation is fluid and could change the sources told Bloomberg.
News of CME’s potential sports derivatives foray emerged 10 days after rival Intercontinental Exchange (NYSE: ICE), which owns the New York Stock Exchange (NYSE), took a $2 billion stake in Polymarket — one of the largest prediction market operators. That investment values Polymarket at $9 billion to $10 billion post-money.
The report also surfaced at a time of steady news flow suggesting football season has brought ballooning volume to Kalshi, Polymarket, and other prediction markets. Those headlines have punished sports betting stocks, but some analysts argue that scenario is overdone and traditional sportsbooks still command significantly larger handle than prediction markets.
Does FanDuel Fit In To CME Sports Plans?
In August, CME and FanDuel, owned by Flutter Entertainment (NYSE: FLUT), announced a partnership through which they’ll bring event contracts tied to economic data releases and financial asset prices to the sportsbooks clients.
The aforementioned FCM structure CME is reportedly pursuing for sports contracts is comparable to its arrangement with FanDuel, stoking speculation that the largest online sportsbook could play some role in the exchange operator’s sports plans, but it’s not clear if that will happen.
In August, the companies said they’ll offer yes/no contracts on the daily performances of major equity indexes, such as the Nasdaq-100 and S&P 500, commodities, cryptocurrencies, and economic data reports, including GDP and inflation. The derivatives will cost as little as $1. Other contracts could offered in the future.
“As we work with CME Group to develop our offering, we are continuing to prioritize active conversations with a variety of stakeholders including state regulators and have made no decisions as we maintain an open dialogue in an evolving legal and regulatory landscape,” a FanDuel representative told Bloomberg.
FanDuel Needs to Tread Carefully
The extent of FanDuel’s involvement with CME’s prospective sports contracts offering, if any, remains to be seen. What is clear is that the gaming company needs to tread carefully if not outright eschew any participation in sports event contracts.
A slew of states have warned sportsbook operators that moving into sports event contracts could jeopardize their licenses in those jurisdictions. At a time when prediction market volume is paltry compared to sportsbook handle, the risk of losing traditional gaming licenses may be too high for operators to move earnestly into prediction markets.
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