DraftKings’ Railbird Acquisition Forges Path To Prediction Markets
This has been percolating for a number of months, however DraftKings is stepping into prediction markets.
News of the sports activities betting operator’s curiosity in buying Railbird Exchange, a CFTC-approved Designated Contract Market, broke in July. On Tuesday, Oct. 21, the acquisition grew to become official.
In the press release announcing the deal, DraftKings says the acquisition of Railbird Technologies and its subsidiary Railbird Exchange “helps DraftKings’ broader technique to enter prediction markets, increasing its addressable alternative by way of regulated occasion contracts.”
There is not any point out of “sports activities” within the launch.
DraftKings does say it plans to launch a brand new cellular app, referred to as DraftKings Predictions, a platform to commerce “real-world outcomes spanning, finance, tradition, and leisure,” and probably “further classes over time,” seemingly holding the door open for sports activities.
“We are excited in regards to the further alternative that prediction markets may symbolize for our enterprise,” DraftKings CEO Jason Robins mentioned.
FanDuel, DraftKings’ main competitor within the state-regulated sports activities betting house, additionally has designs on prediction markets, by way of its partnership with CME Group. News broke final week that CME Group plans to offer financial contracts tied to sports events and economic indicators by way of futures fee retailers, together with one it’s forming with FanDuel.
Will DraftKings Offer Sports Event Contracts?
While “sports activities” is conspicuously absent from the announcement, there’s likelihood DraftKings’ core competency is on the street map.
DraftKings and FanDuel should tread rigorously, nonetheless. Multiple states have warned sports activities betting licensees that they face severe regulatory penalties, together with revocation of their licenses, in the event that they get entangled with prediction markets.
“Operators care about their license, and when you get a license stripped in a single state, it has deleterious impact in different states,” playing legal professional and lobbyist Bill Pascrell III instructed DiFiRate final week.
Prediction markets are regulated below the CFTC, however in accordance with many states, the businesses are working as unlawful sportsbooks.
Opportunity for sportsbook operators may lie in states the place sports activities betting just isn’t authorized, California and Texas amongst them.
Kalshi, a number one prediction market, affords sports activities occasion contract in all 50 states, and Polymarket’s US re-entry is imminent (possible as soon as the federal government shutdown ends).
There’s a divide when it comes to how digital-first sportsbook operators and conventional playing firms are approaching prediction markets. While DraftKings and FanDuel are diving in, BetMGM, for instance, maintains it has no plans to interact within the house.
Pascrell believes courts will in the end resolve that prediction markets can supply sports activities contracts, however till then, sports activities betting operators ought to be cautious.
“I feel it’s a very unhealthy look” for operators to supply what states contemplate unlawful, he mentioned, “and it’s gonna agitate a number of people.”
Stock market likes the transfer
The inventory market seems to be bullish on prediction markets.
Shares of DraftKings spiked upon yesterday’s information of the Railbird acquisition.
That’s in distinction to the market’s negative reaction to recent news of Kalshi rolling out same-game parlays – a key revenue driver and differentiator for sportsbooks – in addition to Intercontinental Exchange’s $2 billion funding in Polymarket.
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