Fanatics to buy BGC exchange assets, launching prediction market in 23 states

Fanatics is buying a regulated exchange and clearinghouse from BGC to launch its own prediction market platform.

Fanatics, the global sports platform, agreed to acquire Water Street Labs LLC and CX Clearinghouse L.P. from BGC Group Inc., gaining a Commodity Futures Trading Commission-registered designated contract market and derivatives clearing organization. The financial terms of the deal, announced Monday, were not disclosed.

"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," said Matt King, chief executive officer of Fanatics Betting and Gaming.

Fanatics Markets, launched in 2025, allows users to trade on sports outcomes including game winners, player milestones and tournament champions. The platform is accessible in 23 U.S. states and four territories, including California, Texas and Florida. By owning its own exchange and clearinghouse, Fanatics can directly list and clear prediction contracts rather than relying on third-party infrastructure, giving it greater control over product design, listing decisions and fee structures.

The deal marks a significant step in the institutionalization of prediction markets, an asset class that has drawn regulatory scrutiny from state regulators who argue such platforms constitute illegal gambling. Startups including Kalshi have clashed with regulators over sports contracts, while Polymarket has faced enforcement actions from the CFTC. Fanatics, by acquiring CFTC-registered entities, gains a federally regulated framework that could provide a legal shield and open the door to institutional capital that has largely stayed on the sidelines.

Institutional Bridge to Retail Trading

BGC will contribute its market data and analytics capabilities to develop new data products combining prediction market sentiment with traditional financial data. The partnership connects BGC's institutional market infrastructure — built over decades in fixed income, foreign exchange and commodities — with Fanatics' retail customer base of millions of sports fans.

"This represents an important strategic step for BGC to expand our data and analytics capabilities while combining our institutional expertise with Fanatics' consumer reach," said John Abularrage, BGC co-chief executive officer. "No one knows the sports fan better than Fanatics, and we believe the acquisition of BGC's DCM and DCO will supercharge Fanatics Markets."

Fanatics Markets introduced features including FanCash rewards, Fanatics ONE loyalty benefits, Combos and FanViz, along with risk management tools designed to help users trade responsibly. The platform is operated through Paragon Global Markets LLC as an introducing broker and Morton St. Trading Investments LLC as a futures commission merchant, both CFTC-registered and members of the National Futures Association.

Competition and Regulatory Context

The prediction market industry has grown rapidly as retail traders seek event-driven exposure beyond traditional sports betting. Kalshi, the largest CFTC-regulated prediction market, has reported surging volumes but has faced legal battles with state regulators over the classification of sports contracts. Polymarket, operating primarily on blockchain infrastructure, processed billions in trading volume during the 2024 U.S. election cycle but has operated without CFTC registration.

Fanatics' acquisition of regulated exchange infrastructure gives it a structural advantage: the ability to offer both retail and institutional products under a single federally regulated umbrella. The company's existing customer base of sports fans, combined with its loyalty and rewards ecosystem, creates a distribution channel that pure-play prediction market startups lack.

What's at Stake

The deal positions Fanatics to capture a share of the rapidly growing prediction market industry, which has attracted interest from retail traders and institutional investors alike. For BGC, the transaction allows the brokerage and financial technology firm to monetize its regulatory infrastructure while retaining a partnership role in data and analytics. The companies expect to close the transaction pending regulatory approvals.

If successful, the Fanatics-BGC partnership could accelerate institutional adoption of prediction markets as a legitimate asset class, potentially drawing hedge funds and asset managers seeking alternative beta sources. The combined entity's ability to offer CFTC-regulated products across both retail and institutional channels may pressure standalone competitors to seek similar regulatory infrastructure.

This article is for informational purposes only and does not constitute investment advice.