What DraftKings and FanDuel Prediction Market Plays Mean for the Sports Betting Biz

Established sports activities betting giants have discovered themselves speeding to the prediction-market desk to verify trade frontrunners don’t eat their lunch.

Two of the most important sportsbooks in the USA, FanDuel and DraftKings, every launched their very own prediction market play in 2025. Day by day fantasy sports activities app PrizePicks has likewise entered the fray. However equities analysts are already suggesting these incumbents could also be too late to sluggish the momentum of trade frontrunners, Polymarket and Kalshi, whilst prediction markets face mounting authorized challenges from state regulators within the U.S.

Prediction markets permit their customers to wager on just about something, not simply sports activities: politics, inventory and crypto markets, and even cultural occasions are on the menu. These markets are structured as futures contracts, enabling customers to purchase and promote shares in an consequence that later settle at $1, and are regulated by the Commodity Futures Buying and selling Fee on the federal stage.

Weekly prediction market quantity lately topped $2 billion throughout Polymarket, Kalshi, Myriad, and Limitless, and has been steadily climbing every week all year long. (Disclosure: Myriad is a product of Dastan, Decrypt’s father or mother firm.) An typically cited Certuity report estimates that prediction markets may attain $95.5 billion by 2035, with a compound annual progress fee of 46.8%.



Prediction markets working in the USA, similar to Kalshi, require a license from the CFTC. However state gaming authorities have lately begun to push again, arguing these platforms ought to require licenses from them too. It’s a stress between state and federal authorities that authorized specialists say may very well be headed for the Supreme Courtroom.

FanDuel, which entered into an settlement in August with futures buying and selling large CME to supply occasion contracts, lately acquired scrutiny from regulators in Nevada throughout a gathering final month.

“You’re in a crucible that’s not possible going ahead,” Brian Krolicki, the Nevada Gaming Fee vice chair stated throughout the October assembly, referring to FanDuel. “You all try to do it proper, you’re licensed within the stuff you do, however … the battle that’s arising between shareholders and regulators is profound. It’s very troublesome to hedge for the long run versus staying regulated.”

The Nevada regulator delivered his feedback the identical morning that the FBI introduced the arrest of NBA gamers and a coach, together with dozens of others, within the largest sports activities playing scandal in years. The scandal led to questions from authorized specialists and former regulators over how federal and state authorities plan to take care of unlawful betting as cash on video games more and more strikes to prediction markets—an trade regulated by an company within the CFTC with little expertise monitoring sports activities betting.

It’s towards this backdrop that sports activities betting corporations are actually evaluating the potential dangers and rewards of getting into the prediction market house. If FanDuel and DraftKings are profitable of their prediction market performs, they may come packaged with new regulatory scrutiny. However some equities analysts aren’t satisfied that the sports activities betting giants will get that far.

On Tuesday morning, Financial institution of America equities analysts downgraded DraftKings and Flutter, FanDuel’s father or mother firm, citing a “good storm” of catalysts: declining margins, the potential for new taxes being levied on betting corporations within the U.S. and U.Okay., and more and more stiff competitors from prediction markets.

The BofA analysts moved the businesses from purchase rankings to impartial. In addition they set a $250 worth goal for Flutter, down from $325; and a $35 worth goal from DraftKings, down from $40. The businesses, which commerce on the Nasdaq beneath the DKNG and FLUT tickers, have been buying and selling for $28.74 and $222.85, respectively, on the time of writing.

Buyers have been urgent even bigger corporations, like on line casino operators, about whether or not they plan to enter the prediction market fray.

Caesars Leisure, which owns 50 casinos throughout the U.S. and has a big on-line betting enterprise, advised buyers throughout its earnings name this week that it’s monitoring the prediction market trade, however doesn’t have any fast plans to enter it.

“We is not going to put any of our licenses in danger,” Chief Govt Officer Tom Reeg stated on the Oct. 28 convention name. In his personal Q3 earnings name the following day, MGM Resorts Worldwide CEO Invoice Hornbuckle echoed Reeg’s sentiment.

Neither FanDuel nor DraftKings instantly responded to a request for remark from Decrypt.

The 2 sports activities betting corporations had been telling buyers they have been maintaining a tally of the prediction market house lengthy earlier than really leaping in with their very own performs.

FanDuel’s technique was to crew up with the largest derivatives change on the earth. CME first launched its personal occasion contracts in 2022—two years after Polymarket and 4 years after Kalshi have been based.

The CME contracts have been initially supplied via the change’s retail dealer companions, NinjaTrader, Tradovate, and TradeStation. The deal inked with FanDuel in August implies that the businesses will share in advertising and marketing efforts and develop distribution to new, however not but launched, FanDuel app.

CME occasion contracts have principally centered on financial and monetary indicators, just like the S&P 500 or the value of gold and Bitcoin.

In its newest month-to-month quantity report, CME famous that its S&P 500 occasion contract noticed 1,548 trades in October, up 41% from the identical time in 2024 and a 32% improve month-over-month. For the reason that begin of the yr, the CME S&P 500 contract has seen 25,998 trades, which is an 82% improve from the identical interval final yr.

That’s small potatoes in comparison with the record-high 26.3 million common each day contracts traded on CME in October. It nonetheless stays to be seen how a lot FanDuel’s involvement will enhance CME’s attain with retail customers.

Eric Zitzewitz, an economics professor at Dartmouth Faculty, advised Decrypt that massive gamers like FanDuel and DraftKings have been reluctant to leap into prediction markets due to the chance they may cannibalize their present merchandise.

To be clear: Sports activities betting and occasion contracts are usually not the identical factor. Sports activities betting entails wagering on the end result of a recreation of probability ruled by state playing legal guidelines. Occasion contracts are federally regulated monetary devices that allow merchants take limited-risk positions on measurable market outcomes like costs or financial indicators.

However there may be overlap within the goal audiences for each merchandise.

“They do have an incentive to ‘quick comply with’ although as soon as it is clear the brand new trade goes to occur, they usually typically have the benefit of present belongings (e.g., a buyer base) that create a possible benefit over the innovator,” he stated. “In some circumstances, they’re quick sufficient and the incumbent wins; in others (those we have a tendency to recollect), they go away it too late.”

DraftKings seems to be on the lookout for methods to keep away from competing with itself. The corporate introduced its acquisition of prediction market agency Railbird two weeks in the past after the sale had been rumored since July. However the information got here with some caveats.

An individual acquainted with the rollout of the corporate’s DraftKings Predictions cell app stated it is going to “deal with states with out authorized sports activities betting.” And though it is going to supply “finance, tradition, and leisure” contracts at launch, the corporate left the door open so as to add sports activities contracts down the road.

At the same time as sports activities betting corporations play catch up, state regulators are crying foul about what they view as an unjust encroachment on their authority over state playing and gaming licenses.

“States try to make use of each arrow of their quiver to handicap these markets to the best extent doable, the federal prediction markets,” founder and managing legal professional of Brogan Regulation Aaron Brogan advised Decrypt. “And that is smart—however I do not suppose it is smart legally. 
I do not suppose that this type of motion is more likely to be sustainable in federal court docket in the long run.”

What’s extra, the state regulators have insinuated that established sports activities betting corporations like FanDuel and DraftKings may jeopardize their present licenses in the event that they have been to additionally supply prediction markets in the identical state.

The principle authorized protection for prediction markets has been that as a result of they’re regulated by the CFTC, states don’t have authorized grounds to impose restrictions. Neither FanDuel nor DraftKings has been sued by a state regulator over its prediction market performs as of this writing.

However any strain on DFKG or FLUT to remain out of the trade would unfairly handicap them towards their opponents, Brogan added.

“The consequence may very a lot be that corporations like DraftKings and FanDuel find yourself outcompeted in no matter equilibrium we attain on the regulatory therapy right here,” he stated, “and Kalshi and Polymarket are capable of take an enormous chunk of their market share earlier than they’re capable of react.”