TL;DR
- DraftKings bought prediction market firm Railbird for an undisclosed amount.
- It will launch the “DraftKings Predictions” app focused on states without legal sports betting.
- The acquisition comes amid a sector boom, which surpassed $2 billion in weekly volume.
Sports betting giant DraftKings has officially entered the prediction market. They recently confirmed the acquisition of the company Railbird for an undisclosed amount. This move, which had been rumored for months, precedes the launch of the new “DraftKings Predictions” mobile app.
The company plans to offer contracts based on “finance, culture, and entertainment” through this new platform.
The acquisition comes at a time of excitement for the prediction market industry. Interest in the sector has soared, hitting a milestone last week by surpassing $2 billion in total weekly trading volume for the first time. This exponential growth is supported by reports like one from Certuity, which estimates the market could reach $95.5 billion by 2035, with a compound annual growth rate (CAGR) of 46.8%.
The key piece of the acquisition is the license Railbird holds. Since June, the firm has operated as a designated contract market (DCM) with the U.S. Commodity Futures Trading Commission (CFTC). This license allows it to self-certify and offer event contracts, a fundamental regulatory asset that DraftKings now has at its disposal to expand its offerings.
Regulatory Strategy and Fierce Competition
DraftKings’ strategy appears fine-tuned to navigate the complex U.S. regulatory landscape. A person familiar with the company’s plans indicated that the new DraftKings prediction market app will initially focus on states that currently do not have legal sports betting. This could allow the company to avoid direct conflicts with state gambling regulators, who, according to experts like Paul Zilm, might view this offering as a threat to existing regulated betting licenses.
DraftKings’ move also intensifies competition in an already heated sector. In July, Polymarket, the current volume leader, acquired the derivatives exchange QCX (also CFTC-licensed) for $112 million. Meanwhile, other players like Kalshi have been embroiled in legal battles over jurisdiction, arguing that their federal regulation by the CFTC exempts them from individual state licenses.
Jason Robins, CEO of DraftKings, stated that the combination of Railbird’s platform with DraftKings’ “scale, trusted brand, and proven expertise” positions them to “win in this incremental space.” The market reaction was positive: following the announcement, DraftKings (DKNG) shares rose 3.21% in pre-market trading on Wednesday.
