America’s leading sports betting operator is exploring a dive into the world of prediction market outcomes.
FanDuel Sportsbook has discussed a partnership with fast-rising trading platform Kalshi, according to a report from Front Office Sports. A potential first-of-its-kind deal could open up new market efficiencies and expand brands.
Key Takeaways
- FanDuel parent company Flutter has publicly shown interest in getting into the prediction outcome market in the U.S.
- Kalshi is live in 50 states, while FanDuel is currently operating in 25 jurisdictions.
- Sportsbooks have been hesitant to risk their operating licenses in legal markets.
Last month, Flutter Entertainment, FanDuel’s parent company, acknowledged that it’s “closely monitoring” the rise in popularity of contract-event trading. CEO Peter Jackson said during a quarterly earnings call that the gaming company was “interested in the potential opportunity” of launching a prediction outcome market.
Getting into that segment could give FanDuel access nationwide. Kalshi operates in all 50 U.S. states, including highly populated ones like California and Texas that don’t have legal sports betting. Also, Kalshi is regulated by the Commodity Futures Trading Commission, not state agencies.
FanDuel offers legal sports betting in 25 states, with each jurisdiction regulating the operator. Flutter has experience in this area as the gaming company owns and operates Betfair, the largest trading exchange in Europe.
“We're very thoughtful about it, particularly having seen so much success in terms of having the best product (BetFair) in the market,” Jackson said in May.
Different markets
Kalshi offers contracts on single-game outcomes and doesn’t offer spreads, totals or player props. FanDuel could possibly bring Kalshi into complex, controversial markets with much more liquidity.
Kalshi burst on the scene last fall when the prediction market platform received a court ruling allowing it to offer trading contracts on the 2024 U.S. Election. Kalshi dipped its toe in sports when it offered contracts on Super Bowl LIX across the country.
Since then, the platform has expanded its sports offerings to college basketball, the NBA, NHL, MLB, UFC, soccer, golf, and more. Kalshi also partnered with highly popular trading platform Robinhood, which previously dealt with only stocks and other markets, to offer contracts on sports events.
FanDuel has risen as the market-share leader in the U.S. since PASPA was overturned in 2018. The online operator offers traditional betting markets to lucrative jurisdictions like New York, New Jersey, Pennsylvania, and Illinois.
Taking issue
Regulators and industry trade groups see the rise of Kalshi as a threat to legal sports betting. Nevada, Maryland, and New Jersey are among more than a handful of states that have sent Kalshi and other prediction market platforms cease-and-desist letters in hopes of driving the unlicensed company out of their jurisdictions.
However, Kalshi has responded with multiple lawsuits, claiming those state regulators can’t stop the prediction trading platform because they don’t answer to them.
“We are literally like a financial exchange, but the underlying trading is events,” Kalshi founder Tarek Mansour said in April. “The CFTC is our regulator. If the CFTC tells us to stop, we will absolutely stop. If they don’t, then we won’t.”
The prediction market platform has also been opposed by some gaming industry groups, including the Indian Gaming Association. The American Gaming Association, a U.S. trade group that FanDuel is a member of, has not outright taken a side for or against prediction markets, but the AGA has previously had “strong concerns” and said those sport-event contract platforms are “problematic for a variety of public reasons.”
Clearing the way
Brian Quintenz, President Donald Trump’s nominee to chair the CTFC, is a former Kalshi board member and has not indicated that he’d change how prediction market platforms operate in the U.S.
With sites like Kalshi seemingly going nowhere, sportsbooks getting more involved in the controversial prediction business could seem more viable. Other gaming companies have echoed FanDuel’s interest in the market, but none have taken the leap, presumably concerned about threatening current and future sports betting operating licenses with state regulators.
