The prediction markets app targets sports bettors in states where online wagering remains illegal while offering trades on financial benchmarks.

CME Group and FanDuel announced plans to launch a prediction markets platform in December, aiming to blur the traditional boundaries between financial derivatives and sports betting.

The partnership pairs the century-old Chicago derivatives exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term with North America's largest online gambling operator to offer so-called event contracts starting at one cent per trade.

Still Investing or Already Gambling?

The deal raises questions about why a derivatives marketplace typically serving institutional clients and sophisticated traders would join forces with a company built on daily fantasy sports and wagering to launch FanDuel Predicts.

It will function as a standalone mobile app offering contracts on sports outcomes, stock indexes, commodity prices, and economic data.

“Our new event contracts on benchmarks, economic indicators and now sports will appeal to a new generation of potential participants who are not active in these markets today,” CME Chairman and CEO Terry Duffy said in a statement. “This launch will dramatically expand our distribution and reach, connecting directly with FanDuel's millions of registered U.S. users.”

The question of whether prediction markets still fall under investing or have already crossed into gambling first came up for me in April. Since then, the industry has grown rapidly, but recent moves suggest it is shifting toward the latter.

This is especially evident when the largest market operator, Kalshi, chooses a poker legend to help run its platform, and Robinhood introduces contracts such as “Will the United States say that aliens exist this year?” These kinds of wagers resemble gambling far more than investing.

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In states where online sports betting remains illegal, users of FanDuel Predict will be able to trade contracts on baseball, basketball, football and hockey games. The companies plan to stop offering sports contracts in those jurisdictions once online betting becomes legal there.

Customers will also be able to trade contracts tied to the S&P 500, Nasdaq-100, oil and gas prices, gold, cryptocurrencies, and indicators like GDP and consumer price data. Stakes range from as little as one cent to 99 cents.

Regulatory Hurdles Cloud Launch Plans

The venture operates in a gray area that has drawn federal scrutiny. In September, the Commodity Futures Trading Commission issued an advisory warning companies offering sports event contracts to prepare for potential market disruptions stemming from state-level challenges and ongoing litigation.

A group of U.S. senators sent a letter to the CFTC CFTC The 1974 Commodity Exchange Act (CEA) in the United States created the Commodity Futures Trading Commission (CFTC). The Commission protects and regulates market activities against manipulation, fraud, and abuse trade practices and promotes fairness in futures contracts. The CEA also included the Sad-Johnson Agreement, which defined the authority and responsibilities for the monitoring of financial contracts between the Commodity Futures Trading Commission and the Securities and Exchange Commiss The 1974 Commodity Exchange Act (CEA) in the United States created the Commodity Futures Trading Commission (CFTC). The Commission protects and regulates market activities against manipulation, fraud, and abuse trade practices and promotes fairness in futures contracts. The CEA also included the Sad-Johnson Agreement, which defined the authority and responsibilities for the monitoring of financial contracts between the Commodity Futures Trading Commission and the Securities and Exchange Commiss Read this Term in September challenging the agency's oversight of prediction markets, arguing these platforms circumvent state gambling laws by offering yes-or-no contracts. The lawmakers accused event contract issuers of avoiding “myriad state laws, including licensing and background investigations, minimum age requirements, federal anti-money laundering rules, and consumer protections.”

The CFTC has not formally approved sports event contracts or determined whether they violate the Commodity Exchange Act's prohibition on contracts based on “gaming.” The agency noted in its advisory that outstanding litigation "should be accounted for with appropriate contingency planning, disclosures, and risk management policies and procedures."

Kalshi, a prediction market operator, has been locked in legal battles with both the CFTC and state regulators. Robinhood suspended its event contracts launch in February, one day after introduction, following a CFTC request.

Second Attempt at Sports Market Entry

CME and FanDuel first announced their partnership in August, though details remained sparse until this week. CME has operated event contracts since September 2022, targeting retail investors with payouts capped at $100 per contract. The FanDuel collaboration represents the exchange's largest push to reach mainstream consumers outside traditional trading circles.

FanDuel has approximately 17 million customers across all 50 states and operates 25 retail locations. The company is owned by Flutter Entertainment, which trades on both the New York Stock Exchange and London Stock Exchange.

FanDuel plans to extend its consumer protection program to the new app, including deposit limits, spending alerts, and self-exclusion options. Customers must complete a “Know Your Customer” verification process that requires birth date, Social Security number, home address, banking information and valid identification.

The app will include educational resources about prediction markets and how to buy and sell event contracts. Customers can set deposit limits that apply across all FanDuel products.

“We can't wait to bring FanDuel's proven approach to product innovation into this dynamic sector,” FanDuel CEO Amy Howe said. “Our partnership with CME Group allows us to leverage their deep market expertise built over decades while delivering the seamless, accessible and trusted experience our customers expect.”

Hot Prediction Markets

And although FanDuel speaks confidently about KYC and education, the end user is still receiving a product rooted in gambling, somewhat similar to the now-banned binary options that circulated in Europe several years ago.

These uncertainties, including regulatory ones, have not discouraged more companies from joining the accelerating trend. In November, the cryptocurrency exchange Gemini announced plans to launch its own prediction markets, and a week earlier a similar move was made by another digital-asset platform, Crypto.com.

The platform is slated to launch in December, subject to appropriate regulatory filings. Neither company disclosed financial terms of the partnership.