FanDuel Follows DraftKings Into Prediction Markets

FanDuel Predicts will offer event contracts on stock index funds, economic data, commodities—and sporting events. (Gabby Jones/Bloomberg)

FanDuel is getting into prediction markets, just days after rival DraftKings made a similar announcement.

The sports betting firm announced on Wednesday that it will debut a stand-alone prediction market app, FanDuel Predicts, in December as part of a partnership between CME Group and FanDuel’s parent company, Flutter .

Shares of Flutter were wavering in after-hours trading on the news, down 1% as of 5 p.m. ET.

According to a joint press release, FanDuel Predicts will offer event contracts on stock index funds, economic data, commodities—and sporting events. Flutter and CME first announced a partnership in August.

Sport event contracts offered by prediction market firms like Kalshi have been a headache for the gambling industry this year, weighing heavily on shares of DraftKings and Flutter.

Event contracts are financial instruments regulated at the federal level by the Commodity Futures Trading Commission. They are legal nationwide and not subject to state gambling taxes, even as the contracts based on the outcome of sporting events closely resemble sports betting.

Last week, DraftKings revealed its own prediction market platform, DraftKings Predictions, which will also offer sport event contracts.

DraftKings and FanDuel have a shared strategy in approaching sports event contracts. They won’t offer them in states with legal online sports betting. That move is likely intended to safeguard their sportsbook businesses and relationships with state gambling regulators, many of whom are opposed to prediction markets.

But, “in states where online sports betting is not yet legal, customers who are not on tribal lands will be able to trade event contracts on the outcome of sporting events,” FanDuel and CME said Wednesday.

DraftKings CEO Jason Robins said last week, “As states see this continue to grow it’s going to put increased pressure on policymakers to strongly consider whether they should follow the path of the other half or so of the country and just pass sports betting legislation.”

“As new states legalize online sports betting, FanDuel will cease offering sports event contracts in those states,” FanDuel’s Wednesday press release said.

Prediction markets could also keep state gambling taxes low, Robins said in an earnings call last week. Gambling operators can pivot to prediction markets “if the taxes get too high,” he said.

“Prediction markets will certainly reignite the conversation around sports betting in some states,” says Chris Grove, partner emeritus at Eilers & Krejcik Gaming, a gambling industry market research firm. “What is less obvious is whether that will create the critical mass necessary to overcome the obstacles standing in the way of sports betting in the states that have yet to authorize it.”

Write to Nick Devor at nicholas.devor@barrons.com