Fanatics agreed to acquire Water Street Labs and CX Clearinghouse from global brokerage and financial technology company BGC Group, bolstering its competitiveness in prediction markets.
The purchase would give Fanatics full control of a stack of Commodity Futures Trading Commission-approved (CFTC) licenses, allowing it to keep its prediction operations fully in-house. This includes Designated Contract Market, Derivatives Clearing Organization, and Futures Commission Merchant licenses.
Agreement reached
Water Street only just received CFTC approval as a DCM on July 16.
Bringing on the new technology means that Fanatics can now directly engage with customers through its Fanatics Markets, allow customers to buy and sell contracts, and settle contracts and payments completely internally.
Fanatics routed trades made in its prediction market through Crypto.com’s North American derivatives branch. That deal was reached last November, a couple of weeks before Fanatics Markets went live in December.
Removing the need for a partnership means that Fanatics won’t have to share its revenue with Crypto.com. Although the financial terms were not disclosed, an example of what an agreement would look like would be if Fanatics took $.02 per $1 in processing fees, and then gave $.01 per dollar to crypto.com.
“BGC are experts in the financial services industry and, like Fanatics, have built their business on a foundation of cutting-edge technology, innovation, and exceptional talent,” Fanatics Betting and Gaming CEO Matt King said in Monday’s announcement. “Their expertise in building and operating regulated exchanges, clearinghouses, trading technology, and institutional market infrastructure makes them an ideal partner.
“By combining that institutional foundation with Fanatics’ unmatched understanding of fans and consumer engagement, we have a unique opportunity to accelerate the growth of prediction markets and deliver a best-in-class experience for both retail and institutional participants.”
Neither entity shared a purchase price or closing date for the sale.
Fanatics jumps into prediction markets
The decision to push Fanatics further into the world of prediction markets signals its intent to compete not just with top operators Kalshi and Polymarket, but also sports betting and gaming companies DraftKings and Underdog, among others.
DraftKings was approved as an FCM in mid-July, giving it the right to act as its own broker. This was the final step in keeping all prediction management in-house, following the company’s acquisition of the Railbird exchange infrastructure.
Underdog earlier this month also confirmed the launch of its CFTC-approved exchange, allowing it to expand its prediction markets across the nation. Underdog shut down sports betting operations in North Carolina and withdrew its sports betting operator’s application in Missouri to narrow its focus on fantasy contests and prediction markets.
Fanatics Markets is already live in 23 states and four U.S. territories, including California and Texas, states where prediction markets are legal and sportsbooks aren’t. Customers can find a plethora of markets that can be bought and sold individually or as part of combos, the prediction industry’s parlay equivalent.
The deal has not been finalized.
The Trade Handle Prediction Markets Take
Prediction markets are much more than the flavor of the month, as evidenced by Fanatics, DraftKings, and other companies pushing their chips to the center of the table. Reports stated that prediction markets handled more than $50 billion in transactions during June and the World Cup, which sets the table for an extremely active period in the fall during the NFL season and the midterm elections.