Fanatics Markets rolls out as sportsbook operators chase new growth

Fanatics Markets launch and product overview

Fanatics Markets rolls out as sportsbook operators chase new growth.

Fanatics Markets rolls out as sportsbook operators chase new growth.

Launched on Wednesday in 10 states and expanding to 14 more this week, Fanatics Markets is offered through a partnership with Crypto.com.

Fanatics has become the first major sports betting company to actually roll out an event‑trading product: Fanatics Markets.

The company launched Fanatics Markets in 10 markets on Wednesday, as first reported by CNBC. Fanatics CEO Michael Rubin recently told CNBC the product was coming through a partnership with Crypto.com.

Fanatics Markets offers event trading on sports, finance and culture. Next year, it will expand into other markets like crypto, stocks, tech and music.

Fanatics’ push into prediction markets is just another step as the tension among regulators, the sports betting industry and the prediction markets continues to head up. Prediction markets are regulated through the Commodity Futures Trading Commission and operators like Kalshi have taken that as a go-ahead to offer event trading nationwide.

“This is really the top of the first inning on a market that’s going to grow exponentially over the next five to 10 years, so we’re not worried about being a couple months behind,” Fanatics Betting and Gaming CEO Matt King said on CNBC’s “Squawk on the Street”.

Regulatory pushback and legal uncertainty

State regulators have taken issue, arguing the push into sports event contracts constitutes gambling without state licensing. There are multiple lawsuits across the country, including a recent ruling in Nevada where a judge reversed his initial decision that had granted Kalshi a preliminary injunction allowing it to operate.

With the unknowns looming, sportsbook operators like Fanatics are taking the opportunity to reach consumers in states where sports betting is not legal. Meanwhile, multiple state regulators have warned sportsbooks that venturing into prediction markets could put their licences in jeopardy.

Where Fanatics Markets will launch

The rollout of Fanatics Markets is occurring in states where Fanatics Sportsbook is not live. Those states on Wednesday included:

• Alaska
• Delaware
• Hawaii
• Idaho
• Maine
• New Hampshire
• North Dakota
• Rhode Island
• South Dakota
• Utah

Fanatics plans to add the product later this week in 14 other states, including California, Florida and Texas.

California and Texas do not have legal sports betting, while Florida’s sports betting market is a monopoly through the Seminole tribe’s Hard Rock Bet. FanDuel and DraftKings attempted to put sports betting on the 2022 ballot in Florida, but the Seminoles thwarted the push with a massive campaign in opposition. Hard Rock declined to comment on Wednesday afternoon on the new plan by Fanatics.

Fanatics appears to be avoiding states with open commercial sports betting, especially the markets where regulators have warned sportsbooks against offering prediction markets. Some regulators, like Michigan, have said “any involvement” with sports event contracts could have implications for sports betting licences.

A Massachusetts warning last month said future regulatory action could be taken against sportsbooks offering prediction markets.

Last month, FanDuel surrendered Nevada licences and approvals while DraftKings withdrew applications there as they prepared their prediction market launches.

Prediction markets go mainstream

DraftKings announced its acquisition of Railbird earlier this year, with intentions to roll out a prediction markets product. FanDuel announced its partnership with CME Group in October with plans to launch its platform later this month.

Daily fantasy sports operators PrizePicks and Underdog have also launched prediction markets products.

Meanwhile, companies are partnering with prediction markets operators like Kalshi and Polymarket to bring their data to consumers. Google announced a deal with the operators to integrate their market information into Google Finance. Yahoo Finance also partnered with Polymarket for a similar integration. This week, CNN partnered with Kalshi to use its data across the company, including a real-time data ticker.

Kalshi CEO Tarek Mansour told Axios the company is seeking more such partnerships.

The National Hockey League also partnered with the pair of prediction markets operators. It was the first major professional league to partner with the industry.

Lawsuits mounting for prediction markets

The prediction markets industry is facing more than 20 lawsuits across the country.

Last week in Nevada, a federal judge lifted a preliminary injunction he awarded Kalshi earlier this year. That injunction had allowed Kalshi to continue operating in the state despite a cease-and-desist order from state gambling regulators.

“Kalshi has raised serious questions about how to properly interpret the statutory language, to divine congressional intent and to resolve the tension between what constitutes state-regulated gambling versus federally regulated derivatives,” US District Judge Andrew Gordon’s order read.

Kalshi plans to appeal Gordon’s latest decision. There are similar lawsuits between Kalshi and state regulators in Maryland, New Jersey, New York and Ohio. In Massachusetts, the state attorney general filed a suit against Kalshi.

Also last week, plaintiffs from six states filed a class action lawsuit against Kalshi in New York. The suit claims the prediction market operator violates state gambling laws and engages in illegal activity.

Last month, a California judge gave Kalshi a court win by denying a request from tribal parties looking to stop Kalshi from operating on tribal land.