Overview

  • Fanatics has reached an agreement to acquire a CFTC-registered exchange and clearinghouse from BGC Group, enabling the company to directly list and settle event contracts on Fanatics Markets without third-party involvement.
  • This strategy aligns with competitors DraftKings and FanDuel, who have also ventured into CFTC-regulated event contracts to engage fans in states where mobile sports betting is prohibited, making ownership of the infrastructure a common approach in the industry.
  • The expansion comes amid a surge in prediction markets, with platforms like Polymarket and Kalshi experiencing significant growth, and analysts estimating that market volumes could hit $1 trillion by 2030.

In a strategic move to deepen its presence in the prediction markets space, Fanatics has announced its intent to acquire a federally regulated exchange and clearinghouse from BGC Group, a significant player in the brokerage industry, as competition intensifies in this burgeoning market.

On Monday, the sports platform revealed its plans to purchase Water Street Labs, a designated contract market registered with the CFTC, along with CX Clearinghouse, a recognized derivatives clearing organization, from BGC, which is listed on Nasdaq. The financial terms of the deal have not been disclosed.

By acquiring both an exchange and a clearinghouse, Fanatics will be able to directly list and settle event contracts on its prediction markets subsidiary, Fanatics Markets, which was launched in December, thereby eliminating the need for third-party trade execution.

This acquisition reflects a larger trend in the industry. Competitors DraftKings and FanDuel have each entered the realm of CFTC-regulated event contracts at the beginning of the year, motivated by a federal framework that allows them to connect with sports fans in states like California and Texas, where mobile sports betting is still illegal. DraftKings accelerated its entry into this space by acquiring the exchange operator Railbird, while FanDuel formed a partnership with CME Group before developing their own proprietary systems. The industry is increasingly favoring ownership of the necessary infrastructure over leasing it from others.