Fanatics acquires derivatives exchange from BGC Group to expand into prediction markets

Fanatics has agreed to acquire a federally regulated derivatives exchange and clearinghouse from BGC Group as the companies partner to expand prediction markets for retail and institutional investors, Bloomberg reported.

The acquisition will give Fanatics Markets the ability to list and clear its own event contracts. Financial terms were not disclosed.

Fanatics plans to begin by offering yes or no contracts tied to sporting events.

Prediction markets allow users to trade contracts based on the outcome of future events. The sector has expanded rapidly as retail interest grows across sports, elections, and other real world outcomes.

The deal will also give BGC exposure to the emerging asset class. The brokerage firm plans to distribute data generated by the Fanatics exchange and eventually make prediction market trading available through its existing systems.

The companies are betting that combining retail participation with institutional capital will improve market depth and liquidity, which remain limited across much of the prediction market industry.

Institutional firms have increasingly explored the sector as both a trading market and a source of data that reflects expectations around future events.

The transaction follows similar consolidation across the industry. Underdog acquired a regulated derivatives exchange and clearinghouse from Aristotle earlier this year, while Robinhood and Susquehanna International Group agreed to purchase a majority stake in a derivatives venue previously owned by FTX.

Fanatics entered prediction markets last year through a partnership with Crypto.com, which operates an exchange regulated by the Commodity Futures Trading Commission.

The company plans to maintain that partnership and route trades through both Crypto.com and its newly acquired venue, Bloomberg reported.

Fanatics also operates a sportsbook that competes with DraftKings and FanDuel. Unlike sportsbooks, prediction market platforms connect counterparties rather than taking the opposite side of customer positions.

The company does not offer prediction markets in states where it already holds a legal sports betting license.

Fanatics has expanded beyond sports merchandise in recent years through investments in online gambling, ticketing, media, and other consumer businesses.