CME Group, the largest US derivatives exchange, has teamed with sports-wagering company FanDuel to bring event contracts to millions of gaming customers in the US, marking the latest expansion for the binary options-style products that have grown in popularity this year.
The contracts will be tied to benchmarks such as the S&P 500 and Nasdaq-100, the prices of oil and gas, gold, cryptocurrencies, and key economic indicators such as gross domestic product and the Consumer Price Index. Further details of additional offerings will be determined in the coming months, the companies said.
CME already operates event contracts that it launched in 2022, targeting retail investors with capped payouts of up to $100 per contract. The new FanDuel partnership represents the exchange's biggest push yet to tap mainstream audiences outside traditional trading circles.
In recent years, its efforts have included the launch of micro-sized futures contracts that are cash-settled rather than physically delivered. Earlier this year, it launched futures products on the Robinhood Markets app.
CME Chairman and CEO Terry Duffy previously said at FIA’s Boca conference that he is “big on retail” and highlighted the growing significance of retail traders to the exchange.
“Retail is a big opportunity for us. [So far] we’ve been focused on introducing smaller-sized products that allow clients to customise their trading strategies with precision…What is critically important is that we stay focused on innovation and new products,” he said in an interview with FIA MarketVoice at the beginning of the year.
Announcing the tie-up with FanDuel, Duffy said: "Individual investors are increasingly sophisticated and continually pursuing new financial opportunities…Together, our event-based products will appeal to the growing public interest in markets, and we will provide education to attract a new generation of potential traders not active in derivatives today."
Non-clearing FCM
As part of the partnership, CME Group and FanDuel will form a new joint venture, under which they will operate a non-clearing futures commission merchant that will facilitate access to the event-based contracts through FanDuel’s app.
A non-clearing FCM accepts orders to buy or sell futures and options, relying on a clearing FCM to manage the post-trade processing side.
CME received approval to operate its own FCM – F&O Financial – at the end of last year. At the time, the move sparked questions about potential conflicts of interest, with market participants ultimately wondering about CME’s plans for it.
Until now, it had not gone beyond acquiring the licence. An exchange spokesperson confirmed to MarketVoice that CME will use its FCM in the partnership and the FCM will operate with FanDuel. The contracts will also be available through other participating FCMs, CME said.
Contracts
The contracts at the heart of the arrangement are regulated financial products that will be listed on and subject to the rules of CME Group exchanges. Customers can express their views multiple times a day for as little as $1 on whether they think certain market-related events will happen, such as the price of gold or oil hitting a certain level.
The companies expect the contracts to launch on FanDuel’s app later this year, pending regulatory review by the US Commodity Futures Trading Commission.
The collaboration comes as event contracts are gaining momentum across the US. Once prohibited, they gained legal recognition from the CFTC in May 2024. Companies like Crypto.com, one of the largest US digital asset exchanges, and prediction market Kalshi, both of which are registered with the CFTC, have begun offering their own sports event contracts. Other companies, like Polymarket, are also making moves to re-enter the US.
FanDuel CEO Amy Howe called the partnership a way to "bring even more new and engaging products to FanDuel's fast-growing customer base” with “best-in-class regulatory compliance and consumer protections."
"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," she said.
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