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Fanatics Has Infrastructure for Unique Prediction Market Offerings But Legal Obstacles Likely Limit Novel Contracts

Derek Helling

Legal Writer

Publish Date: Sep 09, 2026

Fact checked by: Matt Moreno

Key Points

Fanatics' diverse business operations create unique possibilities for Fanatics Markets
Novel contracts could help Fanatics differentiate Fanatics Markets in competitive industry
Regulations governing market listings could limit the scope of unique contracts

While much of the news in the prediction market industry revolves around Kalshi and Polymarket, those are far from the only entities in the space in the United States. Companies like Fanatics, which has multiple diverse business interests, have also established exchanges.

In the case of Fanatics, those diverse business interests have been part of what has limited its exchange. Fanatics hasn't spent a massive portion of its advertising budget on Fanatics Markets for multiple reasons.

However, recent developments suggest that Fanatics may be preparing to ramp up its promotion of Fanatics Markets. The product has some potential for unique positions that could differentiate it from Kalshi and Polymarket.

While Fanatics' diverse operations create those possibilities, they also compromise the feasibility of exclusive event contracts. Legal restrictions also present significant obstacles that may make more common markets preferential.

In turn, Fanatics' efforts to capture revenue with Fanatics Markets could prove limited. However, simply being in the game may be a win for the company.

Fanatics acquired proprietary platform for Fanatics Markets

The biggest move for Fanatics Markets since its December 2025 launch was the company's acquisition of Water Street Labs. Water Street Labs obtained approval from the US Commodity Futures Trading Commission (CFTC) for the prediction market exchange platform just days prior to the announced sale.

Fanatics Markets was platforming markets from The CME Group prior to the transaction. Shifting to its proprietary exchange gives Fanatics greater control of contract availability, market pricing, and settlement rules.

Following the successful migration of Fanatics Markets to the Water Street platform, the company can begin to tweak the exchange to its liking. Fanatics' other business interests present interesting possibilities.

(Photo by Karl-Josef Hildenbrand/picture alliance via Getty Images)

Sports trading cards become new business interest

Fanatics has transformed itself into the dominant producer of trading cards related to popular US sports properties. It did this by winning contracts for exclusive trading card licenses from Major League Baseball, the National Basketball Association, and the National Football League.

Fanatics strengthened that position by acquiring the trading card manufacturing operations of Topps, Inc. The various trading card products continue to bear the Topps branding and set names.

Fanatics now controls that distribution and manufacturing, though. That means the company can profit from the demand for especially rare cards in Topps products.

Box breaks expand customer base for high-end and highly anticipated products

Secondary market prices for select sports trading cards have never been higher. For example, a 2018 Panini National Treasures Luka Dončić Logoman Autograph card, which Panini only made a single copy of, sold for almost $5.5 million in 2021.

That rarity and the card's status as a Dončić rookie card skyrocketed demand for the limited set. Hobby boxes of the set sold for thousands of dollars upon release.

Circumstances like that created the need in the collector space for "box breaks." Box breaks can benefit both sides of the transaction.

Retailers sell a "share" of high-end trading card products through these breaks to expand their potential sales. The collector gets into a product that they either can't afford to get into at full retail price or can judiciously spend on chasing only the cards that they are interested in.

How box breaks work

After retailers secure products, they can advertise that they plan to break the boxes. Most box breakers assign shares by team represented on the card and price each share according to its potential to produce in-demand cards.

So, a person trying to land the Dončić Logoman Autograph in 2018 would have bought the Dallas Mavericks share of the break, which likely sold for a multiple of the share price for other NBA franchises in the break. The retailer can plan to perform the break whenever they like but usually sets a specific day and time as part of the initial announcement.

When the time comes, the retailer will open the product and present each card to people who purchased shares, typically through a live stream. After the break, the retailer will ship out the product according to the share purchases.

Continuing with the example, the person who purchased the Mavericks share would get all the Dallas cards from the break, whether that group included the Dončić Logoman Autograph or not. Most breakers have relationships with card distributors and manufacturers but are third-party retailers.

However, there are no legal considerations stopping manufacturers themselves from offering breaks of their most popular products. It's an unprecedented and unique opportunity for Fanatics.

Fanatics Markets provides intriguing possibility for sports cards contracts

Box breaks bear some similarities with event contracts on prediction market exchanges. Buyers are trading funds for a chance at an improved return if future events play out accordingly.

Because Fanatics controls the manufacturing of the products, it would have unique infrastructure for offering breaks of trading card sets. Fanatics could offer a shorter turnaround on breaks and wield tighter control of the chain of custody of products.

Those breaks could have a secondary element to them through Fanatics Markets. Markets could post "yes" and "no" contracts on whether a particular card would be revealed during the break in addition to selling actual shares of the product.

Incorporating box breaks into designated contract markets (DCMs) would represent a tremendous escalation in the need for transparency, though. There are other regulatory concerns to consider as well.

Potential issues in event contracts based on box breaks

The CFTC maintains rules for which events can be part of DCMs. These include limitations for markets that may be easily manipulated, that figures of influence could easily have foreknowledge about, and that bear significant economic consequences.

David B. Hoppe, the founder of Gamma Law, explains those regulatory considerations would likely prevent this type of event contract trading. Hoppe says that such markets are "very unlikely to be approved as an exchange-traded event contract given developing CFTC policy."

"A 'which card is in this sealed box' contract would have no price-discovery, hedging, or commercially useful information value, and would be a “game of random chance” probably found to be contrary to the public interest," Hoppe explained. "The possibility of manipulation would likely also be a factor."

Box breakers already deal with integrity and transparency concerns. Criticisms have included allegations of opening boxes prior to break sessions and tipping off buyers as to the contents.

In most cases, box break buyers assume that the break as it should be until a breaker proves untrustworthy. If Fanatics involves DCMs in breaks, the processes around the chain of custody would need to be far more intricate, but Hoppe is pessimistic that such systems could satisfy the transparency thresholds.

"Even with a scrupulously honest implementation it would be difficult to overcome public perception problems," Hoppe commented. "There are internal processes and limitations that could reduce the risk of self-dealing, but I don’t think they would resolve the deeper CFTC public-interest and state-law lottery concerns."

Fanatics has become the dominant player in sports memorabilia and merchandise in the US through its aggressive acquisition and licensing strategies. It has yet to secure the same market share dominance in gambling and prediction market trading, though.

The path to that dominance would be expensive, perhaps beyond the level of expense that the company is willing to endure while waiting for the desired results. Fanatics also faces regulatory difficulties in capitalizing in what makes its platforms unique, such as potentially listing DCMs for sports trading card box breaks.

The convergence of those business interests also limits Fanatics Markets. Fanatics has only made its exchange available in 24 states plus four US territories, excluding all jurisdictions in which it has a gambling license.

Because of these limitations, Fanatics might be content to simply use Fanatics Markets to capture what revenue it can in other US jurisdictions, as that would still represent revenue that it would otherwise not have the opportunity to collect. For legal and logistical reasons, don't expect Fanatics to incorporate its other businesses into Fanatics Markets.

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