We're learning more about how the FanDuel and CME Group prediction market will work.
The details were shared by CME Chairman and CEO Terry Duffy during his appearance on the Bloomberg Odd Lots podcast.
CME Group and FanDuel have teamed up to create "FanDuel Markets." It will blend elements of micro-betting and short-term financial trading, allowing participants to engage in a unique trading experience where event contracts are live for just one hour.
Each day, this app will offer three to four event contracts per asset class. Users can place simple yes/no bets starting at $1, such as predicting whether the price of gold will exceed $3,700 an ounce at the end of the next hour.
Contracts resolve after 60 minutes, making each decision quickly result in excitement and potential profit.
This news comes on the heels of FanDuel's joint venture with Amazon to offer exclusive betting odds for NBA and WNBA games on Prime.
What is a Prediction Market in Sports Betting?
A prediction market for sports betting is like a stock market for game outcomes. On these platforms, users buy and sell contracts that represent their predictions about specific events, such as a team winning a game.
The price of each contract is between $0 and $1 and show how likely people think the event is to happen. If you're right, your contract is worth $1, and if you're wrong, it's worth nothing. Unlike traditional betting, where you bet against the house, here you're trading with other users. These markets are regulated and available across the U.S.
You can make predictions on things like game wins, player performance, or coaching decisions. One example of such a platform is Kalshi, the leading U.S. prediction market.
FanDuel Markets Expected to Offer a Diverse Product Lineup
Initially, FanDuel Markets will focus on financial indices like the S&P 500, commodities such as gold and crude oil, treasuries, and potentially cryptocurrencies.
This shift from traditional sports prediction markets highlights a new approach, possibly paving the way for sports contracts, pending regulatory approval. This platform hopes to offer the speed and simplicity of micro-betting, applied to significant financial sectors rather than sports.
The partnership between CME and FanDuel forms a joint venture functioning as a non-clearing futures commission merchant under the Commodity Futures Trading Commission (CFTC).
It will utilize CME's extensive market infrastructure to ensure high liquidity and adhere to regulatory standards, which are crucial for navigating the complex landscape of event contracts.
Market Context and Strategic Benefits
This venture positions FanDuel to expand beyond traditional sports betting into regulated financial events. It also represents an opportunity to diversify as sports betting profits face increased taxation.
The short-term nature of these contracts makes them more accessible to everyday users, blending speculation with entertainment in a way that mirrors recent fintech innovations like Robinhood's shift towards prediction-based products.
Collaborating with CME is expected to offer several benefits, including:
- Regulatory credibility
- A focus on consumer protection
- The ability to manage intricate contracts efficiently
This approach might signal a shift in perception within U.S. prediction markets, highlighting the potential for regulated, broadly accessible micro-betting options in financial markets.
Could This Be The Future of Sports Betting?
Most prediction market platforms cover a wide range of sports, including major leagues such as the NFL, NBA, and MLB, as well as international events. Some even offer options on esports and racing.
They all have different fees and rules about how much you can trade, and some let you trade around the clock while others have set hours. These platforms are becoming more popular because they're transparent, innovative, and are working to be legally accepted in more places.
CME and FanDuel are providing a novel, regulated micro-betting product that targets retail users interested in speculation and financial market engagement.
By offering a quickly resolving, accessible trading experience, this new market may significantly alter how prediction markets are viewed and utilized in the United States.
