Share 
FanDuel and CME Group’s prediction market partnership is showing signs of strain, with the disagreement centered on sports-related event contracts.
Sportico reports that CME CEO Terry Duffy criticized sports prediction markets on the company’s earnings call, saying many of them are “gambling” and warning the issue could eventually reach the Supreme Court. That public stance stands out because FanDuel and CME launched a joint-venture prediction market app in December, and sports activity appears to be a major part of the business.
According to the report, more than 99% of the notional volume on CME’s prediction market exchange on Tuesday came from sports betting. The article also says the Commodity Futures Trading Commission certified three CME-proposed sports wager types: tennis tournaments, golf tournaments, and college football games.
Duffy also raised concerns about market structure, saying affiliated market makers can create credibility issues and that some sports contracts are vulnerable to manipulation. CME, however, said in a statement that it remains interested in the FanDuel relationship, particularly as a way to put its financial markets in front of FanDuel’s 12 million registered U.S. users. The company added that it also offers some sports products that meet regulatory standards as event contracts.
The business relationship appears to be getting more complicated beyond the public comments. CME contributed $10.2 million upfront for a 51% stake in FanDuel Prediction Markets Holdings LLC, according to SEC filings cited by Sportico. But the report also says FanDuel’s prediction market app has started brokering bets through Crypto.com-owned Nadex in addition to CME’s exchange.
FanDuel has also applied with the National Futures Association to broker prediction market trades without CME’s involvement, according to the article. CME said there are contractual restrictions on operating alternative venues during the partnership.
For players and market watchers, the immediate takeaway is less about a product change and more about uncertainty around how sports prediction markets will be offered and regulated. Key questions now include whether FanDuel and CME narrow the scope of their partnership, how regulators treat sports event contracts going forward, and whether FanDuel pursues a broader brokerage model outside the joint venture.
—
Source: As reported by sportico.com.
