CME Group (NASDAQ: CME) and FanDuel said today that they are collaborating to provide yes/no event contracts based on financial markets and economic data to the sportsbook's customers, potentially upending the rapidly expanding prediction markets sector.

Both the gaming company and the exchange operator anticipate that those offers will go live later this year. Yes/no contracts on the daily performance of commodities, cryptocurrencies, key equity indexes like the Nasdaq-100 and S&P 500, and economic data updates like GDP and inflation will all be included in the derivatives. The derivatives can be purchased for as little as $1. In the future, more contracts might be provided.

The move comes as one of the biggest prediction markets, Kalshi, is getting more involved in sports event contracts, possibly challenging long-standing market dominance by sportsbooks like FanDuel. Kalshi stated in regulatory filings released on Monday that it will provide yes/no futures on football player props, sides, and totals unless the Commodities Futures Trading Commission (CFTC) prohibits it.

Speaking about Kalshi, there have been speculations that the gaming company and the prediction market were in talks about a possible agreement, so the CME/FanDuel combination could be a blow to that company.

The CME and FanDuel Partnership May Attract Young Traders and Bettors

Financial exchanges with younger clientele are offering gamified trading, as demonstrated by Robinhood Markets (NASDAQ: HOOD), which offers football futures. Some industry watchers claim that these companies are blurring the distinction between investing and betting. FanDuel, a division of Flutter Entertainment (NYSE: FLUT), seems to be responsive to customer needs.

"We believe there is potentially a wide audience for trading event-based markets and we want to provide a platform that allows our customers to engage in this activity,” said CEO Amy Howe in a statement.

FanDuel provides online sports betting in 22 states, Puerto Rico, Washington, DC, and shortly Missouri. FanDuel has the largest or second-largest market share for online sports betting in almost all of those markets. With over 12 million users, according to the business, the CME relationship might get off to a good start.

The fact that many of those customers are younger and actively trade and invest on sites like Robinhood may indicate that the partnership with CME will be successful.

In accordance with their agreement, CME and FanDuel will establish a new joint venture that will be governed by the CFTC, just like Kalshi and other prediction market operators, and will be set up as a non-clearing futures commission merchant (FCM).

The Success of Financial Prediction Markets

Prediction markets associated with financial assets have well-established, successful test cases. Those were Kalshi and Polymarket's flagship products before they ventured into sports.

Another well-known brokerage company among active traders is Interactive Brokers, which has expertise with event contracts related to finance. Its ForecastEx platform, which enables wagers on economic data like consumer sentiment, inflation, and the monthly jobs statistics, was introduced in 2024.

Other gaming businesses may be on the lookout to make similar moves given the partnership between CME and FanDuel and the increasing penetration of prediction markets into the sports industry. While some have been linked to unverified acquisition rumors, others have stated that they are keeping up with developments in the yes/no event contracts market.