PrizePicks, which describes itself as “the largest daily fantasy sports operator in North America,” has received federal approval that will allow it to begin offering prediction markets.
The company announced today that it is the first DFS-affiliated company to be registered as a Futures Commission Merchant (FCM) with the National Futures Association (NFA). The FCM status enables PrizePicks to partner with a Commodity Futures Trading Commission-approved Designated Contract Market (DCM) to accept orders from PrizePicks users to buy and sell futures contracts.
PrizePicks CEO Mike Ybarra struck a compliant tone in the press release announcing the approval, praising both the NFA and CFTC.
“The honor of being the first sports entertainment platform to receive a FCM registration from the NFA is a testament to our industry-leading compliance and consumer protection programs that both the NFA and CFTC demand,” Ybarra said. “Acting Chairman Caroline Pham’s vision for the CFTC promotes innovation while reinforcing the importance of strong regulatory standards. Her leadership has set a thoughtful tone for the agency and our industry.”
“This is a defining moment for us,” added Jason Barclay, chief legal officer and head of public policy for PrizePicks.
FCM approval allows PrizePicks to partner with approved prediction exchange
The FCM announcement comes the day after it was announced that international lottery-focused gaming company Allwyn International AG had purchased a majority stake in PrizePicks. The transaction put PrizePicks value at $2.5 billion.
The NFA is designated by the CFTC to regulate the derivatives industry and register and review firms and individuals applying to become approved FCMs, as well as other designations, like commodity trading advisors and introducing brokers.
PrizePicks is approved as both a registered FCM and member of the NFA, according to the NFA database. PrizePicks registered under the name Performance Predictions II LLC, doing business as PrizePicks Predict.
NFA-approved FCMs can offer prediction markets by partnering with a company that has received DCM approval from the CFTC. For example, retail brokers Webull and Robinhood both have registered with the NFA as FCMs and offer select prediction markets from Kalshi, a CFTC-designated DCM, on their platforms.
DCM partnership, launch timeline still in the works
PrizePicks currently offers fantasy sports contests of some form in 45 states. PrizePicks’ real-money fantasy contests, like pick’ems, are available in most but not all of those states. PrizePicks is in states without legal sports betting, like Texas and California, so the company could be bringing another sports betting alternative to those large jurisdictions soon.
PrizePicks has yet to reveal what types of prediction markets they plan to offer, but presumably they will have sports event contracts, letting users trade on things like game winners, point spreads and totals, as well as (depending on the DCM) player props and potentially other non-game sports markets, like who will perform at the Super Bowl halftime show.
PrizePicks also has not announced a DCM partner or a timeline for when prediction markets might be available. Josh Kun, PrizePicks’ director of communications, tells Prediction News that plans are still in the works.
“No concrete plans for us to share at the moment, but we are excited to be the first operator in the space to receive FCM registration approval from the NFA which speaks volumes to our high regulatory standards.”
PrizePicks follows Underdog’s prediction market entry
While PrizePicks is the first DFS company to receive approval as an FCM by the NFA, it won’t be the first DFS company to offer prediction markets in the U.S. In early September, Underdog announced it was teaming with Crypto.com to offer sports event contracts through its platform in 16 states. While Crypto.com’s exchange CDNA has CFTC-approval as a DCM, Underdog does not have FCM approval from the NFA.
Sports prediction markets have faced legal challenges from states that have said that they are sports betting and considered illegal in their jurisdictions. Kalshi, which has faced the brunt of the legal actions and is fighting back, claims that federal oversight from the CFTC supersedes state regulatory requirements.
Some states have warned that licensed sports gaming operators offering peer-to-peer prediction trading through partnerships could risk punishment, including loss of licensure. The warnings have come from states like Ohio and Arizona, which require DFS operators to be licensed. PrizePicks is not currently in Ohio, but does have a license in Arizona, so it will be interesting to see whether they’ll face a challenge from the Arizona Department of Gaming over its prediction offerings.
In August, sports betting giant FanDuel announced it was partnering with the CFTC-approved exchange CME Group to begin offering (at least initially) non-sports prediction markets.
