During DraftKings’ Q2 earnings call on Aug. 7, the first few questions asked during the Q&A session were about the company’s approach to prediction market prospects. CEO Jason Robins didn’t offer any concrete answers about when or if DraftKings will launch prediction markets, but largely echoed earlier statements about keeping a close eye on developments in the space.
Robins said DraftKings is taking a “measured approach” to prediction markets and is waiting to see how things pan out with certain legal issues facing current prediction platforms.
“We’re evaluating,” Robins said. “Obviously we have a lot of stakeholders, state regulators, relationships with tribes, others that we want to make sure we consider as we think about what our different options are. We’re keeping a close eye on it and figuring out what we want to do.”
Robins’ comments came two days after Front Office Sports reported that DraftKings was gearing up to announce “a prediction markets-related partnership” as soon as next week, citing an unnamed source familiar with the situation.
DraftKings still considering prediction market moves
Robins was asked about the technological aspects of prediction markets, as well as how such markets would cross over with DraftKings’ sports betting customers. Robins’ answers were all primarily of the “wait and see” variety.
“It’s too early to say,” he said. “We’re obviously evaluating options and following the space, but we’re not really intimately familiar yet with what the different technology components are.”
When asked his thoughts on the benefits of being a first mover into prediction markets, Robins said there are advantages and disadvantages.
“I do think that being an early mover in a space like this can be important,” he said. “I also think being a literal first mover may not be as important and there are downsides to that as well.”
Robins also said DraftKings is keeping a close watch on legal proceedings that threaten to prohibit prediction platforms from offering sports markets in certain jurisdictions.
“A lot of what I think we need to see will come from watching how things unfold with others that are currently offering prediction markets,” he said. “I think we’ll kind of have to see how that goes and evaluate. It’s all happening in very fast real time, so definitely a lot to think through.”
Prediction markets mentioned in DraftKings investor letter
An Aug. 6 DraftKings press release and an investor letter regarding Q2 earnings said that the company’s guidance for fiscal year 2025 now includes anticipated financial impacts from a sports betting launch in Missouri and higher tax rates in New Jersey, Louisiana, and Illinois. But, the press release notes, “the Company’s guidance for fiscal year 2025 does not include the potential launch of a Prediction Markets offering.”
Prediction markets were also mentioned elsewhere in the investor letter:
“We continue to monitor events surrounding federally-regulated Prediction Markets and are actively exploring ways to enhance shareholder value through this opportunity. As always, we value our relationships with both industry stakeholders and policy makers and will work collaboratively as we evaluate next steps.”
DraftKings reportedly interested in acquiring CFTC-approved Railbird Exchange
A Front Office Sports report in mid-July said that DraftKings was in talks to acquire Railbird Exchange, which received Designated Contract Markets (DCM) approval from the Commodity Futures Trading Commission on June 13. That designation allows Railbird to offer prediction markets (including those related to sports outcomes) in all 50 states, which would enable DraftKings to quickly enter the space and compete with platforms like Kalshi and Polymarket should the reported acquisition come to fruition.
The Aug. 5 FOS report on DraftKings’ imminent prediction platform partnership said that the forthcoming announcement “may or may not be related to the reported Railbird talks.”
Last summer, DraftKings applied to become a member of the National Futures Association (NFA), the U.S.’s self-governing body of derivatives organizations, the first sign that the company was interested in offering prediction markets. But DraftKings pulled its membership application, which was filed under the name “DraftKings Predict” in March of this year.
While DraftKings hadn’t directly commented on the NFA application or the Railbird Exchange acquisition report previously, earlier this year Robins said that the company was “watching (prediction market developments) very carefully.”
Railbird Exchange is the second most-recent prediction market platform to earn CFTC approval to offer prediction contracts nationwide. The most recent, QCEX, was acquired by Polymarket shortly after it received CFTC approval in early July, setting the stage for its re-entry into the U.S.
Legal battles over sports prediction markets remain unresolved
Robins’ noncommittal comments about keeping a close eye on entering the prediction market space were in line with what other executives from gambling and sports betting companies have said.
The allure of offering sports and other prediction markets is obvious. Since introducing sports markets in January, much of Kalshi’s trading volume has been dominated by sports event contracts, which so far resemble the moneyline and futures bets offered at sportsbooks. Besides potentially staving off prediction market platform competition, a sportsbook with CFTC approval to offer prediction contracts would gain entry into all 50 states, including large ones like Texas and California, which have yet to legalize sports betting.
While uniquely positioned to launch prediction markets, traditional sports betting companies are likely waiting for the outcome of various legal challenges to Kalshi and other platforms’ ability to offer sports prediction markets in certain states that consider them unauthorized, illegal sports betting. Kalshi is arguing that federal oversight through the CFTC supersedes state regulatory decisions.
As hinted at in the recent DraftKings investor letter, companies are likely reluctant to commit too soon or too heavily on future prediction market offerings since they rely on good relationships with state gaming commission and other regulators.
BetMGM CEO Adam Greenblatt said as much during a recent MGM analyst call when he referenced the legal battles during comments about the company’s prediction market prospects.
“Our state regulators have been very clear. Our tribal partners have been very clear. Thirty-four attorneys general have been very clear. They do not believe prediction markets should offer sports contracts,” Greenblatt said.
Sports betting companies likely to add prediction markets at some point
If states are successful in prohibiting prediction platforms from offering sports contracts in their jurisdictions, it might temper sports betting companies’ urgency to enter the space. But even without the ability to offer sports markets in every state, some sports betting operators might still be interested in adding prediction markets to their product offerings.
Following the 2024 U.S. presidential election, which drove large trading volume to prediction market platforms, Robins seemed keen to get DraftKings in on the action.
“We’ll have to see where it fits in the priority list, but it is something we’ll plan on looking at ahead of next election, for sure,” he said.
In June, Front Office Sports reported that FanDuel, DraftKings’ biggest competitor, had engaged in talks with Kalshi regarding some kind of partnership that could potentially bring prediction markets to the sports betting giant.
This week while appearing in front of the Nevada Gaming Control Board, Erica Okerberg, a lawyer for Flutter Entertainment (FanDuel’s parent company), said the company had not entered any agreement with Kalshi. But, she said, “Like other gaming operators, they continue to monitor the litigation and regulatory matters (related to prediction markets).”
More and more, it is seeming as if it’s a matter of when, not if, sports betting companies will begin offering prediction markets in some form.
