Fanatics Buys Its Own Rails, Joins the Prediction-Market Land Grab 🏟️

Fanatics has agreed to acquire Water Street Labs and CX Clearinghouse from BGC Group, giving the sports merchandise company control of a federally regulated exchange and clearinghouse to launch and settle its own prediction market contracts, the companies said Monday. Financial terms were not disclosed.

Water Street Labs operates as a CFTC-registered designated contract market, while CX Clearinghouse is a registered derivatives clearing organization. Owning both entities allows Fanatics to list and clear event contracts directly through Fanatics Markets, the prediction-markets subsidiary it launched in late 2024, rather than routing trades through third parties. Fanatics Markets is currently available in 23 states and four U.S. territories.

The deal extends a pattern set by rivals in the sports-betting space. DraftKings acquired exchange operator Railbird to fast-track its entry into CFTC-regulated event contracts, while FanDuel partnered with CME Group before both companies moved to proprietary infrastructure. Under the new arrangement, Fanatics and BGC also plan to jointly develop market data products that combine prediction-market activity with traditional financial data.

The transaction lands amid rapid expansion across the sector. Coinbase (COIN) partnered with Kalshi to bring prediction markets to its users in 50 states, and Robinhood (HOOD) has begun offering event contracts through the same exchange. Crypto-native venue Polymarket, which operates on a blockchain, and Kalshi have driven much of the growth, with Kalshi recording $33 billion in trading volume in June, per data from Dune Analytics. Combined prediction-market volume across Polymarket, Kalshi and smaller venues such as Limitless and Myriad stands at $48 billion so far in July, according to Dune. Wall Street participation has also increased, with NYSE parent ICE investing $1.6 billion in Polymarket. Bernstein analysts project prediction-market volumes will reach $1 trillion by 2030, with revenue climbing to roughly $10.8 billion.