By Nick Devor
FanDuel is launching a prediction market in five states through a partnership with CME Group, the latest step in the sportsbook's effort to meet a challenge from companies such as Kalshi and Robinhood Markets.
FanDuel Predicts will allow people to buy so-called event contracts based on economic data, cryptocurrency prices, the outcomes of cultural events -- and, of course, sports. Event contracts are legal nationwide and built around yes/no questions, such as "Will the Yankees win?"
Shares of FanDuel's parent company, Flutter Entertainment, ended the day up 1.1%. CME was up 1.5%.
"CME Group prediction markets will enable a new generation of users to express their views on global benchmarks, economic indicators, sports and more," CME's Chief Financial Officer Lynne Fitzpatrick said in a news release on Monday.
FanDuel Predicts is now available in Alabama, Alaska, North Dakota, South Dakota, and South Carolina, according to a news release. The announcement comes just days after rival DraftKings debuted its own prediction market in 38 states.
"In addition to financial markets, sports contracts will be available across baseball, basketball, football, and hockey in states where online sports betting is not yet legal, except on tribal lands," the release said.
FanDuel's senior vice president of new ventures, James Cooper, said the five-state launch will give the company a sense of how people interact with the product, "enabling us to refine our approach as we expand to additional states in 2026."
FanDuel has a history of launching products in phases. In April, it launched a so-called fantasy pick-'em app, FanDuel Picks, in five states before bringing it to another 12 in August.
Prediction markets have dominated the conversation about sports betting in 2025, weighing heavily on shares of Flutter and DraftKings. Both companies operate online sports-betting businesses in states where that is legal, but prediction markets can operate in states where traditional sportsbooks haven't been legalized.
On an earnings call early this year, Flutter CEO Peter Jackson sounded lukewarm on prediction markets, saying "they could be an interesting opportunity." But that was before the debut of a variety of sports event contracts now available on prediction markets.
On his company's latest earnings call, in November, Jackson said he was "extremely excited about expanding our U.S. portfolio to include FanDuel Predicts."
Prediction markets have advantages and disadvantages for sportsbooks. On the plus side, FanDuel believes that prediction markets will help "accelerate" legalization of regular online sports betting, Jackson said on the call.
Sports wagering is subject to state taxes in the states where it is legal. Event contracts are taxed and regulated by the federal government as financial instruments.
The idea is that sports event contracts will be a substitute for traditional sports betting, and that once state legislators see all the tax revenue that could be flowing into their coffers, they will change their tune on online sports betting. At that point, FanDuel will swap its prediction market for its sportsbook. DraftKings is taking an identical approach.
"As new states legalize online sports betting, FanDuel Predicts will cease offering sports event contracts in those states," the company said in Monday's press release. The five states where FanDuel Predicts is now available don't yet have legal online sports betting.
One mark against prediction markets for FanDuel: The nature of event contracts make it difficult to replicate parlay bets, one of the most profitable types of wagers for a sportsbook. Parlays are made up of multiple individual bets tied into one, and each bet, or "leg," of the parlay must be satisfied for the entire wager to pay out.
Adding legs reduces the odds of success but increases the potential payout, making parlays engaging for bettors and lucrative for the sportsbooks.
Parlay bets on a sportsbook are endlessly customizable, with the house able to provide odds for almost any combination of wagers a bettor can dream up. On a prediction market, however, each event contract requires two traders to take the opposite sides of every bet, so the parlays have to be preset combos.
"I don't think you should underestimate quite how hard it is to bring parlays to life on these platforms, and they can only really be delivered in a prepackaged way," Jackson said on the November earnings call. Still, parlays on FanDuel Predicts will be "available early next year," he said.
Write to Nick Devor at nicholas.devor@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
December 22, 2025 17:32 ET (22:32 GMT)
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