Fanatics buys regulated exchange, enters prediction market in 23 states

Fanatics is acquiring federally regulated exchange and clearinghouse infrastructure from BGC Group, giving the sports merchandiser full control to list and settle its own prediction market contracts.

Fanatics agreed to acquire Water Street Labs and CX Clearinghouse from BGC Group, gaining a federally regulated exchange and clearinghouse to operate its own prediction markets across 23 states. The deal, announced Monday, includes Water Street Labs, a Commodity Futures Trading Commission-registered Designated Contract Market, and CX Clearinghouse, a CFTC-registered Derivatives Clearing Organization. Financial terms were not disclosed.

"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," said Matt King, CEO of Fanatics Betting and Gaming. "Their expertise in building and operating regulated exchanges, clearinghouses, trading technology, and institutional market infrastructure makes them an ideal partner."

Fanatics Markets, the company's prediction brand launched in December 2025 through a partnership with Crypto.com, is available on iOS, Android and the web in 23 states including California, Texas and Florida, plus four US territories. The platform allows users to trade on sports outcomes such as game winners, player milestones and tournament champions, and has introduced features including FanCash rewards, Fanatics ONE loyalty, Combos, FanViz and risk management tools.

By owning its own exchange and clearinghouse, Fanatics can list and clear contracts directly, accelerating product development and reducing reliance on third-party partners. The company also plans to combine BGC's institutional market data with its consumer reach to create new data products, potentially bridging retail prediction markets with institutional trading for the first time.

The Prediction Market Land Grab

Fanatics enters a rapidly expanding sector where CFTC-regulated exchange Kalshi and blockchain-based Polymarket have driven mainstream adoption. Coinbase partnered with Kalshi to bring prediction markets to users in all 50 states, while Robinhood began offering event contracts through the same exchange. DraftKings announced plans in late 2025 to launch its own prediction platform, signaling intensifying competition for user engagement.

The sector has drawn regulatory scrutiny. Prediction market startups including Kalshi have clashed with state regulators over whether sports contracts constitute illegal gambling. Nevada lawmakers introduced a bill this month to ban sports prediction markets, while Pennsylvania lawmakers proposed legislation to regulate them. The NCAA has also raised concerns about threats to athletes.

Fanatics entered the sports betting industry in January 2023 and launched its online sportsbook eight months later. The company acquired a federally regulated introducing broker in July 2025 as part of its push into prediction markets. The BGC deal gives Fanatics the full technology stack — exchange, clearinghouse and introducing broker — to operate independently of partners.

"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-CEO. "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 and BGC will partner to deliver new market data products that combine prediction market sentiment with traditional financial market data, the companies said. The partnership marks the first attempt to connect retail-focused prediction markets with the institutional marketplace, according to Fanatics.

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