DraftKings, PrizePicks, Others May Be Readying Prediction Market Plans

DraftKings (NASDAQ: DKNG) and a few other well-known gaming companies are attempting to register with the National Futures Association (NFA), according to a number of recent filings with the organization. This could suggest interest in entering the prediction markets market.

Prior to withdrawing its registration with the NFA earlier this year, DraftKings was regarded as a pending member of the organization.  The NFA authorized a primary file on June 25 for a company called Gus III LLC.  Co-founder Paul Liberman and Jason Robins, the company's CEO, are mentioned as principals in that document, which also gives a DraftKings address.

DraftKings withdrew its previous NFA application without providing an explanation.  More recently, purchase rumors have been linked to the sportsbook operator's aspirations for prediction markets.  The NFA filing might indicate that the gaming corporation is keeping its options open and looking into alternative ways to have exposure in prediction markets.

Among the other well-known gambling companies that have registered with the NFA is Fanatics Betting & Gaming.  The fact that a May filing by Morton St. Trading OpCo was updated on July 31 with a request to be included as a foreign currency broker may indicate that privately held Fanatics is looking into prediction markets, possibly on a global basis. The principals named in the complaint are senior executives of Fanatics' gaming division, and the company's New York office is situated on Morton Street.

The Significance of It

Gaming businesses' NFA registrations are significant since the Commodities Futures Trading Commission (CFTC), the regulatory agency that oversees yes/no exchange operators, views the organization as a "registered futures association."

Exchanges that offer futures contracts and derivatives to customers are required by the Commodities Exchange Act (CEA) to register with the CFTC.  Since almost all CFTC members are registered with the NFA, CFTC accreditation requires this step.

There is more to the tale, even though those are valid explanations for why DraftKings, Fanatics, and other gaming companies are registering with the NFA.  The sporting goals of prediction market organizations are hardly concealed.  Some market watchers think it will only be a matter of time until such companies start selling parlays, as Kalshi stated earlier this week that it will provide football player props, sides, and totals.

Because FanDuel announced an agreement with CME Group on Wednesday that will allow FanDuel customers to access yes/no contracts linked to financial markets and economic data, gaming companies may be forced to accelerate their prediction market ambitions.

Winners, Underdog  filed with the NFA as well

The NFA has also received files from the industry titans of daily fantasy sports (DFS), PrizePicks and Underdog Fantasy.  A limited liability company connected to PrizePicks, Performance Predictions II, is regarded as a pending member of the NFA.  Several senior PrizePicks executives are among the guiding principles for that organization.

A direct rival of PrizePicks, Underdog Fantasy, has two NFA registrations.  One is for a company called UDM LLC, which is attempting to obtain approval for swaps and futures clearing merchants (FCM), both of which are relevant to the operations of prediction markets.

G&B Broker has a second NFA file pertaining to Underdog.  According to a file made in April, the business is requesting approval to introduce brokers and swap firms.