Meta Building Prediction Markets App ‘Arena,’ Per NYT Report

Meta is building a standalone prediction markets app, putting one of the world's largest social platforms head-to-head with Polymarket, Kalshi, and the broader event-contract space. The news already moved DraftKings, Flutter, and Robinhood lower on the session.

What the NYT reported

Meta Platforms CEO Mark Zuckerberg has directed staff to create a prediction markets platform, a person familiar with the company's plans who asked not to be named confirmed to CNBC. The New York Times reported on Tuesday that Zuckerberg recently dispatched a small team at his company to create a smartphone app similar to Polymarket and Kalshi, citing two employees with knowledge of the matter.

Two employees with knowledge of the plans told the Times the app — referred to internally as “Arena” — would be separate from Meta's social media platforms, Instagram and Facebook. The app would operate separately from Meta's existing social networking platforms, including Facebook, Instagram, WhatsApp and Messenger.

Points, not cash, at least for now

The prediction markets app would not use actual money to trade on the platform, a contrast to other prediction markets where traders use cash to speculate on future events. The Times report said Meta's app would instead rely on a video game-style points system, but that money may be used on the app in the future.

That structure is a workaround for the regulatory minefield around event contracts, while still letting Meta test product-market fit before any real-money pivot.

The distribution edge

Meta aims to grow the app by leveraging its large social networking audiences and directing them toward using it, according to the report. In April, the company reported 3.56 billion daily active people, a metric it uses to track unique users who open any one of its apps in a day.

That is the part that should make incumbents nervous. No prediction market operator today comes close to that funnel.

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Why the sportsbooks dropped

Sports betting platform DraftKings fell more than 2% after the report was released, reaching its low of the day. The stock ended off 2%. FanDuel parent Flutter Entertainment also fell nearly 2% after the report, but was still positive on the day, up 0.4%.

Flutter and DraftKings have both struggled over the past year on worries about how prediction market platforms — which offer sports-related event contracts — could disrupt their sports gambling businesses. Trading platform Robinhood, which offers contracts from various prediction market platforms, also declined after the Times' initial report.

Not Meta's first try

Meta had previously launched a similar product called Forecast in 2020, which encouraged users to make predictions about current events and emerging trends during the early stages of the Covid-19 pandemic. Meta ultimately took down the product in 2022.

Prediction markets could balloon to $1 trillion in annual trading volumes by decade-end, Bernstein said in April. The TAM is what changed.

Options market and stocks to watch

Watch how flow positions around the names most exposed to a Meta entrance into prediction markets:

• META: watch for a re-rating of Meta's optionality beyond ads and Reality Labs if Arena gains traction with its 3.56B daily user base.
• DKNG: watch for continued pressure on DraftKings as prediction markets keep encroaching on sports betting share.
• FLUT: watch Flutter for similar event-contract overhang on the FanDuel franchise.
• HOOD: watch Robinhood, which routes prediction market contracts and could see either competition or partnership upside.
• COIN: watch Coinbase given its prior interest in the prediction market space and crypto-rails exposure to Polymarket-style platforms.

Keep an eye on other news as the regulatory framework around event contracts continues to evolve.

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