Allwyn’s newly acquired US asset PrizePicks is entering the rapidly emerging predictions markets space, one which presents some strong growth opportunities but also potential regulatory hurdles.

PrizePicks announced that a subsidiary of its parent company has become registered as a Futures Commission Merchant (FCM) just a day after Allwyn purchased a 62.3% stake in the daily fantasy sports (DFS) platform for $1.6bn, valuing the company at $2.5bn. 

Performance Predictions II LLC is a predictions platform owned by SidePrize LLC, which as mentioned above also owns PrizePicks. Predictions II has become the first company affiliated with a fantasy sports platform to secure FCM registration.

This registration will in turn enable it to buy and sell Commodity Futures Trading Commission-regulated (CFTC) futures contracts, although only contracts offered via a Designated Contract Market (DCM).

Mike Ybarra, CEO of PrizePicks, said: “The honor of being the first sports entertainment platform to receive a FCM registration from the NFA is a testament to our industry-leading compliance and consumer protection programs that both the NFA and CFTC demand.

“Acting Chairman Caroline Pham’s vision for the CFTC promotes innovation while reinforcing the importance of strong regulatory standards. Her leadership has set a thoughtful tone for the agency and our industry.”

Another win for Allwyn?

The news coming just after Allwyn secured terms to buy a controlling stake in PrizePicks may explain the hefty valuation of the company at $2.5bn. 

It could also explain the conditions that should PrizePicks secure certain achievements within three years there will be more cash considerations on offer, potentially increasing the valuation to $4.5bn.

These types of terms are not uncommon in deals of this size, but entry and growth in the prediction markets space could certainly be a target for both Allwyn and PrizePicks – although the latter’s already leading position in DFS alongside competitor Underdog would also account for such a huge valuation.

The company’s prospective entry into predictions does come at a cost, however, that being that it is setting off to join a market which is heavily under the regulatory spotlight, maybe not from the CFTC but certainly at the state level.

The CFTC had a much more confrontational approach to prediction markets, particularly Kalshi, under the Presidency of Joe Biden. At one point it even went as far as ordering Crypto.com and Robinhood to remove events contracts products shortly after they were taken to market.

Under Donald Trump’s second presidency it has become more laissez-faire. State regulators have not, however, with Kalshi has been involved in legal battles with regulators in New Jersey, Nevada and Maryland, while a new one opened up this month in Massachusetts.

Another factor to consider is competition, with Kalshi being the clear leader in prediction markets, while also being partnered with financial services company Robinhood, supporting that firm’s own prediction markets efforts.

Other players include Crypto.com, Polymarket and Flutter Entertainment – Polymarket having re-secured a foothold in the US via M&A after a three year absence for legal reasons, while Flutter has entered via a still-unlaunched-partnership with CME Group.

Regulatory and competition concerns aside, the deal falls in line with Allwyn’s ambition of becoming a lottery-led entertainment platform, having expanded its reach in sports betting, casino gaming, and now fantasy sports and prediction markets. PrizePicks itself also seems undeterred by the prediction markets regulatory sagas.

Jason Barclay, Chief Legal Officer and Head of Public Policy for PrizePicks, said: “As the nation’s leader in predictions, this is a defining moment for us. We are grateful to the NFA for its thoughtful process and diligent work on our application.