Despite Regulatory Risk, DraftKings To Launch Sports Contracts on Prediction Markets Platform
DraftKings is finished ready for California and Texas to legalize sports activities betting, asserting upfront of its Q3 earnings name that it plans to launch a predictions markets platform that may embody sports activities occasion contracts within the coming months.
While DraftKings Sportsbook operates in 25 states plus Washington DC and Missouri to come back quickly, about half of the nation’s inhabitants stays with out authorized on-line sports activities wagering. It may very well be years earlier than the 2 most populous states open their doorways to cellular sportsbooks.
Florida, too, is closed to most operators, due to the Seminoles’ unique association with the state.
Meanwhile, prediction markets, led by Kalshi, are providing sports activities occasion contracts in all 50 states, and DraftKings isn’t sitting idly by.
“We see Predictions as a major incremental alternative,” DraftKings CEO Jason Robins wrote in a letter to shareholders. “We are enthusiastic about our pending launch of DraftKings Predictions and its potential to increase our complete addressable market.
“In the approaching months, we count on DraftKings Predictions to enter many states with sport occasion contracts, unlocking a brand new buyer base and income stream. Nearly half the nation’s inhabitants stays with out entry to authorized on-line sports activities betting, however there are a number of different firms providing federally regulated Predictions in all 50 states.”
Is DraftKings placing state licenses in danger?
Multiple states – Ohio, Arizona, Michigan, Illinois and Nevada – have warned their sports activities betting licensees they face critical regulatory repercussions in the event that they get into the prediction markets enterprise. Some of those warnings apply even when sports activities occasion contracts are provided outdoors the state’s borders.
Having a license revoked in a single state may very well be simply the primary domino.
“Once you get a license stripped in a single state it has a deleterious impact in different states,” Bill Pascrell III, an influential playing business lawyer and lobbyist, instructed DeFi Rate final month.
States, although, must assume lengthy and exhausting earlier than kicking out considered one of its prime two sports activities betting tax income producers.
And pushing the envelope is strictly how DraftKings ascended to its dominant place.
Prediction markets dominated the Q&A portion of DraftKings’ earnings name on Friday.
Responding to a query on the corporate’s conversations with regulators and why it feels comfy transferring ahead with prediction markets, Robins stated, “Through the energy of these relationships and dialog [with regulators], we obtained comfy within the method that we’re taking. …
“As I stated in our observe and on the decision, we aren’t going to be in each state with sports activities, [and] we gained’t even be in each state with non-sports, and I believe we now have a very good sense of the place the sensitivity areas are.”
Robins has been constant in his place that prediction markets gained’t make a lot of a dent in states the place sports activities betting is authorized, a notion that strains up with the regulatory challenges.
“The states that have already got authorized regulated on-line sports activities betting, there isn’t going to be as a lot alternative within the prediction area, not less than within the sports activities prediction area,” he defined.
FanDuel treading extra fastidiously?
FanDuel, DraftKings’ main competitor within the regulated sports activities betting area, can also be eyeing prediction markets, however the firm is ostensibly being extra cautious.
In August, FanDuel and CME Group announced a joint venture to develop and launch event-based contracts. DraftKings’ acquisition of Railbird Exchange, a CFTC-approved DCM, turned official on Oct. 21. These offers are the sportsbooks’ on-ramp to prediction markets.
While “sports activities” was conspicuously absent from each the FanDuel/CME and DraftKings/Railbird bulletins, the operators’ designs on sports activities occasion contract has by no means been a secret.
Bloomberg News reported final month the CME deliberate to launch sports-event contracts by the top of the yr. Terry Duffy, the corporate’s CEO, clarified that sports activities has all the time been on the radar, however that he’s waiting for a firm ruling from the federal government on the legality of sports-based contacts earlier than transferring ahead on them.
“As lengthy because the U.S. authorities isn’t going to object to the self-certification of those and take into account these swaps and never gaming … we’ll proceed accordingly,” Duffy stated on CME’s Q3 earnings name in October.
DraftKings bullish
A dip in sportsbook shares has come along side the rise of prediction markets. The alternatives that await, although, have Robins optimistic.
In different information yesterday, DraftKings introduced a deal to turn into ESPN’s official sportsbook and odds supplier, following information that PENN Entertainment and the sports activities media large are shutting ESPNBet.
“This is probably the most bullish I’ve ever felt about the way forward for DraftKings,” Robins instructed shareholders and analysts. “That might sound stunning given we’re revising our fiscal yr 2025 steerage ranges at present, nonetheless, underlying progress in our enterprise is accelerating. We are additionally more and more advantaged by way of new unique advertising and marketing agreements with ESPN and NBCUniversal in addition to our main product choices persevering with to enhance. Finally, we’re launching DraftKings Predictions within the coming months.”
In his usually daring trend, Robins added of prediction markets, “We will pursue this chance, we’ll compete, and we’ll win. For the identical causes that we now have been profitable competing within the sports activities betting business, we count on to succeed right here.”
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