Boston-based DraftKings has announced that it will wade into the prediction market industry by the end of the year through its acquisition of Railbird Exchange.
Switching Sides
The prediction market platforms like Kashi and Polymarket have caused consternation among sports gaming regulators and the sports betting platforms that operate within those states.
But after several rounds of legal battles, the prediction markets are still operating in all 50 states thanks to federal court rulings that allow them to do so.
The prediction market platforms base their legal authority to trade sports event contracts throughout the nation, even in those markets that have yet to legalize sports betting, like California and Texas, on being governed federally by the Commodity Futures Trading Commission (CFTC), independent of state regulators.
The CFTC has declined to get involved, and only a Maryland state court has given any pushback to Kalshi’s ability to operate.
However, it has become clear that under the Trump administration, of which Donald Trump Jr. is an adviser to both Kalshi and Polymarket, there will be no federal interference, at least in the short term.
So it’s a case of “if you can’t beat’em, join’em,” and DraftKings has done just that. The sportsbook operators have been reluctant to draw the ire of state gaming regulators by switching sides and joining the prediction market industry.
However, with no end in sight, DraftKings purchased Railbird Exchange, which has been approved by the U.S. Commodity Futures Trading Commission (CFTC) to operate as a Designated Contract Market (DCM).
DraftKings Predictions
The acquisition of Railbird will not only allow DraftKings to operate in all 50 states but will also allow it to expand its scope to topics outside of sports, like the outcomes of political races, culture, and entertainment, to name but a few.
The name of the new entity will be DraftKings Predictions, and the company is anticipating launching its prediction market wing by the beginning of next year.
But in order to walk the tightrope between risking its sports betting license in the dozens of states where it operates, DraftKings Predictions may confine itself to only those states that have yet to launch sports betting. Drawing the ire of the states’ gaming regulators does not appear to be a recipe for success despite the allure of additional revenue through its prediction market arm.
“This is a transformational moment for our company, and we are thrilled to be a part of the future of DraftKings,” said Miles Saffran, CEO and co-founder of Railbird. “DraftKings’ scale and leadership in the industry create meaningful opportunities for our team and platform.”
Sports betting industry leader FanDuel has also contemplated entering the prediction market but has been more cautious, concerned about any reverberating effect it would have on its relationships with the states’ regulatory authorities.
