Underdog & Sleeper Ready To Challenge FanDuel After CFTC Approves Prediction Markets
Two fantasy sports companies are about to join the prediction markets after getting the green light from the Commodity Futures Trading Commission. Sleeper and Underdog, primarily known for fantasy sports and pick’em style games, are now able to offer event-based contracts, allowing them to compete with Polymarket, Kalshi, FanDuel, and DraftKings.
Both companies can now operate as Futures Commission Merchants (FCMs).
Sleeper Expected To Drop Lawsuit Against CTFC
Underdog has already been offering prediction markets through a different agreement with Crypto.com’s Derivatives North America (CDNA).
Meanwhile, Sleeper had an ongoing lawsuit against the CTFC, claiming that it was violating the law by refusing its approval as an FCM under the Commodity Exchange Act.
That lawsuit will likely be dropped in the aftermath of its approval, which came shortly after new chairman Michael Selig took over at the CFTC.
Notably, Sleeper appeared to be preparing for entry well ahead of the decision. The company has had a fee schedule relating to prediction markets up on its website for over six months and recently added prediction markets language to its Responsible Risk Management Tools & Info page.
Since the CFTC regulates at the federal level, prediction markets are able to bypass state-by-state sports betting laws and operate nationwide. As a result, companies approved to offer event-based contracts can potentially operate nationwide, a regulatory advantage that continues to draw scrutiny from state gaming regulators, tribal gaming interests, and commercial sportsbook operators.
FCMs Don’t Need Online Sports Betting Licenses
The approvals for Underdog and Sleeper further intensify the ongoing debate over where financial derivatives end and regulated sports gambling begins.
In Arizona, regulators are determining whether or not to revoke Underdog’s fantasy sports license after the company started offering sports event contracts.
Underdog’s entry into prediction markets allowed the company to pivot away from traditional sports betting, where state licenses are expensive and gaining market share can be a major challenge. The company no longer offers sports betting anywhere in the U.S. after withdrawing from its license in Missouri and shutting down its North Carolina sports betting app in December.
With Sleeper and Underdog now operating under federal approval, prediction markets are emerging as a direct threat to the state-regulated sports betting model.
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