Nevada gaming regulators issued a warning Thursday to Flutter Entertainment officials to stay away from the sports prediction markets after its FanDuel brand announced it’s teaming up with CEM Group, the largest U.S. derivatives exchange.
The deal, reported Wednesday, is for the online gaming company to offer bets on stocks, commodity prices, even inflation. It’s expected to launch later this year.
Bloomberg reported that the bets “will be framed in a way that makes them regulated financial products, rather than wagers in a state-supervised casino. Customers will be able to express their views multiple times a day on a wide range of markets with simple “yes” or “no” positions for as little as $1.”
Chicago-based CME is registered with the Commodity Futures Trading Commission, much like Kalshi, which began launching sports contracts earlier this year. Kalshi is locked in a legal battle with Nevada gaming regulators after it received a cease-and-desist order from operating in the state.
Commissioner Brian Klolicki addressed the announcement and asked company officials to explain themselves.
“There was an announcement yesterday that CME Group, the manager of the Chicago Mercantile Exchange, has entered into a partnership with FanDuel,” said Flutter’s private counsel Erica Okerberg. “That partnership is intended to explore or identify opportunities in the event-contracts space. There are no definitive decisions at this point on exactly what contracts might be offered, when, or where. This is really an opportunity for the parties to come together with their collective knowledge and determine what might be a good business opportunity in line with legal and regulatory requirements.”
Okerberg said the partnership has been reviewed by the company’s compliance committee and has been discussed with the Nevada Gaming Control Board. When the company decides on its plans, it will run them through the compliance committee, then share that information with Nevada regulators.
“The intent for the relationship is to be a joint venture,” Okerberg said, not an exclusive arrangement.
Krolicki asked about Flutter’s previous partnership discussions with Kalshi and where that stands.
Kalshi sued the Gaming Control Board, arguing its operations fall under the federally regulated Commodity Exchange Act when it began offering sporting-event contracts in January.
Okerberg said Flutter tried to understand the market by talking with Kalshi and others, but there’s no partnership or agreement with Kalshi and no intent for any at this time.
“I’m walking on a slope here, and I want to be mindful and courteous,” Krolicki said. “You all have been a great licensee. You’re moving in a direction of CFTC oversight, but you understand that we’re in the position of litigation not only as a Commission, but personally. This events market is a very sensitive spot for us and in conflict with this state and our Gaming Control Act and other states’ sports betting. What are the types of prediction betting that you envision pursuing?”
Okerberg said CME Group is an appropriate partner, thanks to its longstanding track record, not only with consumer protection, but also compliance, along with being transparent with regulators. Both of those philosophies are important to FanDuel and Flutter, she said.
“We’re coming at this with the idea that they only want to approach this business in a way that’s thoughtful and respectful of the regulator’s position and at all times in compliance with state, federal, and local law,” Okerberg said. “At this time, we haven’t made a determination of what event contracts we might offer. Those might range from traditional commodities, like gold. Of course, they’re looking into whether sports contracts might be offered in certain jurisdictions in compliance with local laws. They’ve been working with both their internal and external experts to understand the landscape from legal and regulatory perspectives and are mindful of the positions taken, including by regulators in this litigation. At this time, their intent is not to do anything that would jeopardize their licenses in Nevada or other jurisdictions; those licenses remain paramount to the company and their primary focus on business. This is an opportunity to explore whether these types of business opportunities might appropriate and in line with the law and regulator’s expectations.”
Krolicki said at some point, the CFTC may be in conflict with Nevada and other gaming jurisdictions, and until the courts resolve it, they are in conflict. Complying with federal and state matters isn’t possible today, he noted.
“I respectfully remind you that your license is here,” Krolicki said. “That’s important to us and to you. If CFTC is saying you have a green light and Nevada continues to be resistant, who do you mind? The CFTC or the Nevada regulatory process and state Gaming Control Act?”
Okerberg said their compliance committee is focused on and attuned to the Nevada Gaming Control Act and what the Board and Commission expect.
Commission Chair Jennifer Togliatti joked that what she heard from Okerberg is that they’ll talk to Nevada regulators before they see the state in federal court.
“I don’t think the company is going quite that far,” Okerberg said in response, laughing.
