CME teams up with FutureSports to launch sports-linked derivatives

Prediction markets such as Kalshi have rolled out event contracts tied to sports results, but the products remain in a regulatory grey area as some U.S. states classify them as gambling.

Kalshi is engaged in litigation with several states that have accused it of flouting their gaming laws by offering users the ability to bet on the outcomes of sporting events like football and basketball. Massachusetts was the first to seek an injunction to halt its operations.

Last week a judge granted Washington's request to block Kalshi from offering its so-called event contracts in the state, saying the prediction markets platform likely violated the state's gambling laws.

July 29 (Reuters) - CME Group CME.O is partnering with FutureSports to launch traditional derivatives tied to professional and college sports, the exchange operator said on Wednesday, aiming to offer an alternative to event-based contracts traded on prediction market platforms.

The first monthly and quarterly cash-settled futures will begin trading this summer, with FutureSports expected to unveil additional contract details in the coming weeks, potentially laying the groundwork for a new asset class, pending approval.

"The contracts we're developing with FutureSports are built on rigorous indexes and backed by the transparency and integrity that only exchange-traded products deliver," CME CEO Terry Duffy said in a statement.

"This isn't just a new product - it's about bringing real price discovery and risk management discipline to an industry that's ready for it," said Duffy, who is set to step down from the CEO post next year.

FutureSports turns professional and college sports statistics into rules-based financial benchmarks that may be referenced by exchange-listed financial products, helping clients track performance and hedge risk.