DraftKings Reportedly in Talks to Acquire Futures Exchange Company

DraftKings has reportedly been in talks to acquire the as-yet-unlaunched Railbird, a recently licensed, federally regulated prediction market exchange. The sportsbook has been eyeing the futures market that has access to all 50 states under the Commodity Futures Trading Commission.

DraftKings Considering Branching Out

Leading mobile sportsbooks like DraftKings and FanDuel have analyzed the industry landscape and are monitoring the state of the prediction markets. These firms, like Kalshi, have expanded into sports betting event contracts with relative impunity. Although several US states have challenged them in court, the federal regulator that governs them, the Commodity Futures Trading Commission (CFTC), has made no effort to impede their expansion.

Therefore, it is only reasonable to assume sportsbooks would be interested in getting in on a similar aspect of the sports betting market, but without the requirements of state regulators. Prediction market exchanges are free to roam throughout the nation, even in markets that have not yet launched sports betting, like California and Texas.

Exploring New Territory

DraftKings has been coy about its interest in prediction markets and getting regulated by the CFTC. Earlier this year, the Boston-based bookmaker applied with the National Futures Association for its own prediction market company called DraftKings Predict. However, that application was subsequently withdrawn with no reason stipulated.

“DraftKings speaks to a variety of companies regarding various matters in the normal course of business, and it is our general policy not to comment on the specifics of any of those discussions,” a DraftKings spokesperson said in a statement.

Railbird Receives Approval

In June, Railbird Exchange received approval from the US Commodity Futures Trading Commission (CFTC) as a “Designated Contract Market” but has yet to begin trading. The company was started in 2021 by former Point72 analysts Miles Saffran and Edward Tian, and its license makes it attractive to mobile sportsbooks that have seen their sports business cannibalized by other futures exchanges like Kalshi.

CEO and co-founder Miles Saffran said, “Securing this designation is a pivotal milestone for Railbird. There is real demand for people to put their money behind their views, and we are excited to help shape this space from the ground up.”

National Access Without State Licenses

Unlike mobile sportsbooks, futures exchanges do not need state-by-state licenses, nor are they vetted or governed by those regulatory agencies. The prediction exchanges fall under the umbrella of the CFTC and are allowed to operate in all 50 states, at least as of this writing.

These exchanges traditionally dealt in commodities like gold, silver, and even pork bellies, but during the election, they branched out into the presidential election, and in January, they were delving into the sports betting market via the Super Bowl. This has become big business for these exchanges, but individual states have sent cease-and-desist letters, which have been contested in federal court. So far, the prediction markets have won the early legal battles.

Co-founder and COO Edward Tian added, “Event contracts represent a largely untapped opportunity for individuals and businesses alike to hedge risk. We are looking forward to allowing our users to apply the power of capital markets to everything from daily news to societal changes.”