CME Group has struck a deal with sports betting company FanDuel to bring event contracts to millions of gaming customers, marking the latest expansion for the binary options-style products that have exploded in popularity this year.

The partnership creates a joint venture that will let FanDuel users bet on financial markets with stakes as low as $1. Players can make simple yes-or-no bets multiple times daily on everything from S&P 500 moves to oil prices and economic data.

CME already operates event contracts that launched in September 2022, targeting retail investors with capped payouts of up to $100 per contract. The new FanDuel tie-up represents the exchange's biggest push yet to tap mainstream audiences outside traditional trading circles.

Betting Meets Wall Street

“Individual investors are increasingly sophisticated and continually pursuing new financial opportunities,” CME Chairman Terry Duffy said. “To meet this demand, we have created this partnership, which will operate a non-clearing FCM.”

The collaboration comes as event contracts gain momentum across the US financial landscape. These instruments essentially function like binary options, letting traders bet fixed amounts on whether specific events will occur. Each contract pays out a predetermined sum or nothing at all.

Major platforms like Kalshi have led the charge in popularizing these instruments, while brokers such as Interactive Brokers and Robinhood have added them to their offerings.

FanDuel CEO Amy Howe called the partnership a way to “bring even more new and engaging products to FanDuel's fast-growing customer base.” The sports betting company's parent Flutter Entertainment operates Betfair, one of the world's largest betting exchanges, giving it experience with similar prediction markets.

Regulatory Green Light

The timing looks favorable for event contract operators. Earlier this month, the Commodity Futures Trading Commission (CFTC) granted regulatory relief to Railbird Exchange and its clearing partner, exempting them from certain swap reporting requirements that can burden smaller retail-focused trades.

The August CFTC decision reduces compliance costs and signals growing regulatory acceptance of event contracts as a legitimate asset class. Similar no-action letters have been issued to other platforms in the space.

Event contracts were once prohibited in the United States but gained legal recognition from the CFTC, which clarified permissible contract types in May 2024. However, the regulations remain not fully clear.

Yesterday (Wednesday), FinanceMagnates.com reported that Robinhood sued gaming officials in Nevada and New Jersey to prevent enforcement actions in the two states over its sports event contracts. The company also expanded its prediction markets to include professional and college football.

Market Competition Heats Up

CME faces increasing competition as the event contracts market matures. Kalshi remains the volume leader, while newer entrants like Crypto.com have launched similar products. The market has particularly surged around major events like the 2024 presidential election.

The CME-FanDuel venture will operate as a non-clearing futures commission merchant, pending CFTC regulatory review. All contracts will be listed on CME exchanges and subject to CME rules, with access through participating brokers.

CME's existing event contracts cover major benchmarks like the E-mini S&P 500, Nasdaq-100, crude oil, gold and currency futures. The exchange expanded the product line in 2024 to include longer-dated contracts with quarterly and annual expiries.

Industry observers expect event contracts to become a “trillion-dollar asset class” as platforms simplify access to derivatives markets. The FanDuel partnership could accelerate that growth by tapping the sports betting audience that's already comfortable with prediction-based wagering.

Financial terms of the CME-FanDuel deal weren't disclosed. The companies expect to launch their joint platform later this year, subject to regulatory approval.