CME, prediction market partner to FanDuel and DraftKings, has self-certified contracts on U.S. elections, in an apparent U-turn after CEO Terry Duffy last year said political event contracts were not a “good thing.”
Commodity Futures Trading Commission (CFTC) filings show that CME self-certified U.S. election contracts. The business also self-certified parlays on basketball and baseball, alongside new contracts on soccer and golf. The new parlays — following football parlays, which were self-certified just before the Super Bowl — will likely be a major part of FanDuel and DraftKings’ prediction market offerings in states in which they offer sports contracts.
ptc03262642098CME is partnered with FanDuel and DraftKings, which both offer access to CME contracts via their prediction market apps. It does not have a direct platform of its own, and is instead only accessible via FanDuel Predicts and DraftKings Predictions.
When an exchange self-certifies a contract, it tells the CFTC that it plans to list a new type of contract and provides certain details such as the applicable rules. If the CFTC does not object before the listing date specified, the contract may be listed, though it is not technically considered “approved.” It is the method by which almost all CFTC-regulated contracts — in prediction markets and traditional commodities — are listed.
Neither DraftKings nor FanDuel appeared to offer the contracts as of Monday, which was the day that the filing said the contracts would be certified. Prediction markets do not always make contracts live on the date listed on their self-certification filings, and in some cases self-certify a contract but never offer it.
Change of stance
The new self-certification represents something of a change of stance from CME.
Appearing on Bloomberg’s Odd Lots podcast in October, Duffy said he didn’t believe political event contracts were a “good thing.” However, he also made clear that he could change his mind on the topic with new evidence.
“I don’t believe right now that event markets on politics are a good thing,” he said. “That’s my take on it.
“I want to see how it plays out. I didn’t like mail-in voting either. I thought voting should have been in person historically. But my mind has changed on that too for a whole host of reasons. Because now we get more participants and we have technology to protect against bad behavior in voting.
“I think we can get the same on these event contracts for different events. I don’t know if it’s there or not yet.”
Duffy was speaking after CME had announced its partnership with FanDuel, and had been supportive of sports event contracts in the same interview, despite the fact that CME and FanDuel had not announced any plans at that point to offer contracts on sports.
The self-certification filing argued that elections are highly resistant to manipulation.
“The U.S. federal elections underlying the election Contracts are decentralized across thousands of jurisdictions and protected by strict laws and rigorous audits, ensuring the certified results are highly resistant to tampering or manipulation,” it said.
Not clear which states
It is not yet clear in which states the contracts may be offered. Some states include bans on election betting within their sports betting laws, or as a separate law. For example, Arizona brought criminal charges against Kalshi for violating not just the state’s sports betting laws but also its ban on electoral betting. New Jersey and Tennessee are among the other states with legal sports betting that ban wagers on elections.
FanDuel and DraftKings, which both offer CME contracts, have carefully curated their event contract offerings on a state-by-state basis in order to minimize blowback against their state-regulated sportsbooks. For example, neither business offers sports event contracts in states where it holds a sportsbook license. It remains to be seen how they would approach election bets.
DraftKings last year bought Railbird, which is registered with the CFTC as a designated contract market — the same status as CME — and is therefore expected to decrease its reliance on CME as Railbird rolls out, though it will continue to offer access to multiple exchanges. It also offers users access to Crypto.com’s contracts. In contrast, FanDuel and CME operate a joint venture together, and FanDuel uses CME’s futures commission merchant license to offer sports contracts.
