Fanatics Brings Prediction Market Tech In House with BGC Deals

Fanatics is the latest prediction market operator to bring its exchange and technology capabilities in-house, announcing today that it is acquiring a Designated Contract Market (DCM) and Derivatives Clearing Organization (DCO) from BGC Group (NASDAQ: BGC).

Privately held Fanatics is purchasing Water Street Labs and CX Clearinghouse from the brokerage and financial technology (fintech) company. Those acquisitions pave the way for Fanatics to expand its event contract platform while operating its own federally licensed prediction market.

Financial terms of the deal weren’t disclosed. Fanatics entered the prediction market arena last December. To this point, the company’s Fanatics Market business has partnered with Crypto.com. Fanatics Markets is available in 23 states and four U.S. territories.

For Fanatics, an Institutional Move

Not only is Fanatics acquiring a DCM and a DCO from BGC, the two companies are becoming prediction market partners, leveraging BGC’s market-making expertise. They view it as a marriage of fan knowledge (Fanatics) and analytics and data capabilities (BGC).

That could improve Fanatics’ positioning when it comes to capturing more business from institutional market participants, including professional trading desks, which is seen as essential to the long-term growth of prediction markets.

In a report out last week, Macquarie analyst Chad Beynon estimated that turnover on yes/no exchanges will ascend to $1.5 trillion by 2030. To get there, the industry needs increased penetration among the professional investment community.

Quiet on Crypto.com

In discussing the acquisitions and new relationship with BGC, Fanatics did not mention the state of its partnership with Crypto.com. There are examples of consumer-facing operators having multiple prediction market partners, but Fanatics didn’t comment on whether or not Crypto.com is still part of its prediction market mix.

As for the cryptocurrency exchange, it remains a prominent force in the event contracts realm. It has a partnership with FanDuel and, in recent days, reports surfaced that Crypto.com and Robinhood Markets (NASDAQ: HOOD) are in discussions regarding a prediction market partnership.