The regulatory environment for prediction markets has intensified following the announcement of Fanatics Predict, a new initiative in collaboration with Crypto.com, which aims to launch in the coming weeks. Fanatics CEO, Michael Rubin, framed the move as a strategic alignment with consumer demand, recognizing that alternative formats like prediction markets have grown faster than anticipated.
Fanatics' Strategy vs. State Regulation
Rubin's comments underscore a key strategic advantage: while Fanatics is currently licensed for sports betting in only 23 states, the company intends to launch Fanatics Predict in the remaining 27 states where it does not operate a traditional sportsbook. This expansion relies on classifying the product as a financial derivative, or "event contract," regulated by the federal CFTC (Commodity Futures Trading Commission), rather than as state-regulated gambling.
This approach is directly challenging state regulatory bodies:
- Jurisdictional Bypass: Fanatics, like DraftKings and FanDuel, seeks to bypass state-level gambling licenses and taxes by using the CFTC framework.
- Crypto.com's Role: The partnership with Crypto.com is central to this. Crypto.com, which became the first financial derivatives marketplace to offer sports contracts last year, provides the platform and regulatory structure for these event contracts.
Maryland's Emphatic Warning
The Maryland Lottery and Gaming Control Commission (MLGCC) has taken an aggressive stance against this strategy. The Commission has issued a clear warning to its licensed operators, stating that any direct or indirect association with unauthorized prediction markets (those not licensed by the state) could negatively impact their eligibility to maintain a lucrative Maryland sports betting license.
Prediction markets: the next big bet regulators can’t ignore
This move by the MLGCC—which mirrors actions in states like Nevada, where Crypto.com faced resistance and was ordered to suspend sports event contracts—is a direct defense of state regulatory sovereignty. Maryland considers these products, regardless of their federal classification, to be unlawful sports wagering under state law, aiming to protect the integrity of its licensed gaming revenue and industry.
The growing market, fueled by major players like Fanatics and the success of others like Kalshi, guarantees that the regulatory friction between federal (CFTC) and state (MLGCC) jurisdiction will continue to be the most salient factor determining the future of this sector.
