Fanatics is stepping up its game in the sports betting world, acquiring key infrastructure to bolster its prediction market capabilities. The company is purchasing Water Street Labs and CX Clearinghouse from BGC Group, both registered entities essential for running prediction markets. The acquisition means Fanatics can now list and clear its own federally regulated contracts, moving away from its previous reliance on Crypto.com’s exchange infrastructure. CEO Matt King highlighted the strategic shift, emphasizing it gives Fanatics “the freedom to directly list and clear prediction markets.”
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Trend of In-House Moves Grows Among Operators
Fanatics isn’t alone in making this strategic shift. The market’s market has seen similar moves from other major players. Underdog, for instance, launched its own exchange in July, moving away from dependance on Kalshi and Crypto.com. DraftKings also rolled out its DKeX platform in June, following the acquisition of Railbird infrastructure. Robinhood, meanwhile, began using Rothera—a joint venture for contract exchanges—ditching its previous partnership with Kalshi. The industry’s gravitation towards in-house control achieves tighter grasp over economic benefits and customer experience, a trend reminiscent of the sports betting industry’s evolution post-PASPA.
Advantages of Owning Exchange Infrastructure
By securing both a designated contract market (DCM) and a derivatives clearing organization (DCO), companies like Fanatics gain full control over their marketplace dynamics. Still, this move enables firms to not only capture all economic benefits in-house but also to innovate without being tied to third-party constraints. According to industry trends, the shift mirrors how online sportsbooks evolved after PASPA; initially dependent on third-party technology, operators learned the value of owning their platforms. FanDuel used Flutter Entertainment’s tech stack, and Penn Entertainment acquired theScore for proprietary advantages. Still, unlike traditional state-specific sportsbook licenses, these federally regulated markets can operate nationally—opening up new states where mobile betting isn’t yet authorized.
Wall Street and Analysts See Potential
Wall Street’s keen interest in these changes stems from the perception of prediction markets as akin to financial exchanges rather than typical sportsbooks. Macquarie analysts noted that transaction fees and network effects could yield higher profit margins than current online sportsbooks. They’ve flagged the reliance on third-party infrastructure as a potential long-term risk. A research note from Citizens echoed this sentiment, suggesting vertically integrated operators could monetize various aspects of the ecosystem, particularly using market-making as an earnings driver. But industry consultancy Eilers & Krejcik recently projected prediction markets could become a $1 trillion annual trading sector by 2030, with sports-related contracts forming a major chunk of that figure.
What Comes Next for Fanatics
Fanatics’ recent moves indicate a clear strategic path forward in positioning itself at the forefront of prediction market operations. The industry will be watching closely to see how Fanatics manages its newly acquired assets and how swiftly it can capitalize on its expanded capabilities. As new contract types and features roll out, the company’s influence in this rapidly growing market segment is expected to increase. Next on the horizon could be the company’s approaches to monetization and market share expansion.
Marcus Chen brings a quantitative approach to poker strategy and sports betting analysis. With a background in data analytics and over eight years covering professional poker circuits, his articles combine statistical insights with practical advice for serious players looking to sharpen their edge at the table.
