Fanatics prediction markets deal adds CFTC-registered exchange assets

Fanatics prediction markets are set to gain federally regulated market infrastructure after the sports commerce and betting company agreed to acquire Water Street Labs and CX Clearinghouse from BGC Group. Fanatics said on Monday, July 27, that the transaction would give it ownership of both an exchange and a clearinghouse, allowing it to list and clear event contracts directly for customers.

Water Street Labs is registered with the Commodity Futures Trading Commission as a designated contract market, Fanatics said. CX Clearinghouse is registered with the CFTC as a derivatives clearing organization. Together, those designations cover two core functions of derivatives markets: operating a venue where contracts can trade and providing clearing services that stand between counterparties after trades are executed.

The companies did not disclose financial terms in the announcement. Fanatics said the acquired businesses will support Fanatics Markets, its prediction-market platform for contracts tied to outcomes in sports, culture, finance and politics.

What is Fanatics buying for prediction markets?

Fanatics is buying the entities that provide regulated exchange and clearing infrastructure. A designated contract market can list standardized derivatives contracts under CFTC oversight, while a derivatives clearing organization manages clearing, including the process of confirming trades and handling obligations between buyers and sellers.

For prediction markets, that structure matters because event contracts settle according to whether a stated outcome occurs. By owning the exchange and clearinghouse, Fanatics said it will be able to bring contracts to its users through its own regulated infrastructure rather than relying only on outside market plumbing.

The transaction also includes a commercial partnership between Fanatics and BGC. Fanatics said the companies plan to develop client data products that combine prediction-market sentiment with conventional financial-market data.

Matt King, chief executive of Fanatics Betting and Gaming, said BGC brings experience in financial services, regulated exchanges, clearinghouses, trading systems and institutional market infrastructure. He said pairing that base with Fanatics’ consumer business could help expand prediction markets for retail and institutional users.

John Abularrage, co-chief executive of BGC, said the partnership would allow BGC to build out its data and analytics capabilities while using Fanatics’ reach among sports fans. He said BGC expects the combination of its designated contract market and derivatives clearing organization with Fanatics Markets to support broader institutional use of prediction markets.

Where is Fanatics Markets available?

Fanatics began introducing Fanatics Markets in December, when it said it planned to offer the platform in 24 states. The service is now available in 23 states and four U.S. territories, according to Fanatics’ Monday announcement.

Fanatics had included Wisconsin in its December rollout plan, but the company’s current availability information does not list the state. The platform represents another expansion for Fanatics beyond its original merchandise business and its sports-betting operations.

The deal places Fanatics more directly inside a fast-growing segment that sits between consumer trading, sports engagement and regulated derivatives markets. The company’s next step, according to its announcement, is to use the acquired CFTC-registered infrastructure to support direct listing and clearing for Fanatics Markets customers.

This story draws on original reporting from PYMNTS.