Fanatics will launch a standalone prediction market app called Fanatics Markets on Wednesday—and the “G-word” is not included.
The company is taking a similar stance as Kalshi, the current U.S. prediction market leader, by rejecting the word “gambling.”
“I mean, I look at these as trades, right?” Matt King, CEO of Fanatics Betting & Gaming, said in an interview. “If you think about the regulatory context that you sit under with the futures, I think ‘trade’ is the proper vernacular, and so that’s kind of how we refer to it.”
So not gambling?
“I view this as trading,” King said.
In becoming the first traditional sportsbook operator in the U.S. to enter federally regulated prediction markets, getting in just ahead of DraftKings and FanDuel, Fanatics is the tone-setter for how its ilk will describe exchange-style betting. FanDuel declined to comment but did not use “gambling” when announcing its imminent product release through a CME Group pact. DraftKings will refer to its prediction market bets as “trading,” not “gambling.”
Prediction markets allow people to bet on almost any topic, including sports, pop culture and election results. Exchanges facilitate wagers between users (and sometimes institutional funds). Most users lose money, and the apps typically look like sportsbooks.
The go-to argument for why sports betting is not gambling when done through an exchange hinges on the role of the operator. Because exchanges earn revenue via upfront fees on every bet instead of directly from betting outcomes, companies say they are not running gambling shops.
There are obvious business reasons for Fanatics to show interest in a format that has gained popularity in the U.S. this year.
Unlike traditional sportsbooks, which are overseen by states, the Commodity Futures Trading Commission (CFTC) governs most exchange-style betting. This set-up comes with financial perks for companies, such as bypassing state laws and licensing fees and not paying corporate gambling taxes.
Prediction market exchanges and brokers with CFTC clearance—such as the one Fanatics is launching—work even in states that ban sportsbooks, such as California and Texas, though this is being challenged in court. The “gambling” or “not gambling” debate hangs over ongoing prediction market litigation and permeates industry discussions.
Fanatics, working as a broker for a Crypto.com-owned exchange, will roll out its prediction market app incrementally to 24 states where it doesn’t have a sportsbook. Alaska, Delaware, Hawaii, Idaho, Maine, New Hampshire, North Dakota, Rhode Island, South Dakota and Utah are included in Wednesday’s first batch. After nine more states are introduced Thursday, California and Texas will be part of a final batch of five states on Friday.
While seemingly aligned with its competition on how to classify prediction markets, Fanatics Markets does not want to replicate everything Kalshi and other entities do, King said. Fanatics’ “whole new set of competitors,” which includes Polymarket and Kalshi, have sometimes pursued online virality at the cost of controversy.
Polymarket, launching soon in the U.S. and already popular internationally, recently scrambled to limit the damage of an affiliate account using a slur for South Asian people on X. Polymarket chief legal officer Neal Kumar apologized on the social media platform on behalf of the company.
Meanwhile, Kalshi CEO Tarek Mansour has expressed regret about at least one of his firm’s marketing materials for undercutting his “not gambling” argument. Speaking about a Kalshi promo that declared “betting is now legal in California,” Mansour told Bloomberg that “we have a very large marketing team, and the ad is not there anymore.”
Kalshi and Polymarket are on a rapid venture capital fundraising pace, and Kalshi announced a $1 billion raise Tuesday valuing it at more than $10 billion. Fanatics is at a different stage in its corporate life cycle; it last announced a raise in December 2022.
“Anytime there’s a market that is this big that opens up, there’s going to be lots of capital that flows into it, and wherever there’s lots of capital, there will be a reasonably high level of stupidity that occurs,” King said. “Frankly, we’re just preparing for the stupid. The benefit we have is we’re a private business that’s focused on how we win over a 10-year period, not our next fundraise.
“We’ll strike the right balance of still being aggressive and making the most of being early in the market, but we’re going to avoid stupid. It’s a lot easier to do that once you’ve seen a rodeo.”
Fanatics is offering sports, politics and financial markets for now, but it expects to expand its menu after launch and will eventually lean into the kind of pop culture bets posted elsewhere. The pop culture genre lets people wager on things like which musical artist will top Spotify’s streaming charts, or where Taylor Swift and Travis Kelce will get married.
The theme also ties in nicely with the rest of CEO Michael Rubin’s sprawling sports and entertainment business empire—the world’s largest seller of licensed sports apparel—as it seeks new customers.
Fanatics has spent the last few years expanding into other fan economies—trading cards, memorabilia, betting—that create layers of rewards for its top spenders. That’s the plan for Fanatics Markets, King said, though it will take time.
At the start, Fanatics will limit how it uses the Fanatics Markets app to cross-sell products from the other parts of its business in a show of caution toward the CFTC.
Users will be able to log into Fanatics Markets with the same log-in and wallet that works across the full Fanatics ecosystem. But while the company’s sportsbook allows users to generate and spend “FanCash,” its catch-all rewards currency, the new prediction market will not. The sportsbook has also utilized sign-up promotions that include licensed jerseys and other apparel, and that’s unlikely to be mirrored initially in the prediction product.
“We have to be conscious that this is a different regulatory framework, and so we want to make sure whatever we do complies with the various regulations around the futures industry,” King said. “We’ll have to have the conversations with regulators.”
The Fanatics approach to prediction markets aligns with what FanDuel is doing: creating a branded app that hosts a third-party exchange. For Fanatics, that is Nadex, owned by Crypto.com since 2022, while FanDuel is engaged with CME Group.
Fanatics recently acquired Paragon Global Markets, a CFTC-approved Introducing Broker, so it could legally direct bets from its app through Crypto.com’s Nadex markets.
Fanatics’ strategy of being a broker differs from DraftKings, which acquired the Railbird exchange. There are pros and cons for each.
As a broker that merely hosts an exchange’s markets, Fanatics avoids the upfront expense of purchasing exchange infrastructure, which, for DraftKings, came out to about $50 million with potential future escalators. The reduced initial investment would likely make it more palatable to exit prediction markets if legal or regulatory considerations force a withdrawal.
The main advantage of DraftKings’ tactic is that owning an exchange provides greater long-term fee earning potential and control of creating new betting markets. Exchanges with significant user reach tend to earn more fee revenue than brokers because they are setting baseline rates while brokers tack on a smaller surcharge.
There are finite exchanges with existing CFTC approval; DraftKings, Polymarket and Robinhood all announcing exchange purchases in 2025 has reduced the number of possible acquisition targets. The application process to create a new exchange can take years.
Not all traditional sportsbook operators plan to incorporate prediction markets. BetMGM and Caesars are steering clear for now. Getting involved with an exchange, even as a broker, could put the land-based casinos the companies own in Las Vegas at risk, as Nevada has threatened to punish operators that work with or obtain an exchange regardless of if the activity is happening in another state.
King said Fanatics feels comfortable that running Fanatics Markets where it doesn’t have sportsbooks is not going to jeopardize its licenses in sportsbook states.