DraftKings is finished ready for California and Texas to legalize sports activities betting, asserting prematurely of its Q3 earnings name that it plans to launch a predictions markets platform that can embody sports activities occasion contracts within the coming months.
Whereas 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 might be years earlier than the 2 most populous states open their doorways to cell sportsbooks.
Florida, too, is closed to most operators, due to the Seminoles’ unique association with the state.
In the meantime, 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 big incremental alternative,” DraftKings CEO Jason Robins wrote in a letter to shareholders. “We're enthusiastic about our pending launch of DraftKings Predictions and its potential to broaden our whole addressable market.
“Within the coming months, we count on DraftKings Predictions to enter many states with sport occasion contracts, unlocking a brand new buyer base and income stream. Almost half the nation’s inhabitants stays with out entry to authorized on-line sports activities betting, however there are a number of different corporations providing federally regulated Predictions in all 50 states.”
Is DraftKings placing state licenses in danger?
A number of states – Ohio, Arizona, Michigan, Illinois and Nevada – have warned their sports activities betting licensees they face severe regulatory repercussions in the event that they get into the prediction markets enterprise. A few of these warnings apply even when sports activities occasion contracts are provided exterior the state’s borders.
Having a license revoked in a single state might be simply the primary domino.
“When you get a license stripped in a single state it has a deleterious impact in different states,” Invoice Pascrell III, an influential playing business legal professional and lobbyist, informed DeFi Price 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 mentioned, “By means of the power of these relationships and dialog [with regulators], we received comfy within the method that we’re taking. …
“As I mentioned 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 have now 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 traces 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, a minimum of within the sports activities prediction area,” he defined.
FanDuel treading extra rigorously?
FanDuel, DraftKings’ major competitor within the regulated sports activities betting area, can 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, grew to become official on Oct. 21. These offers are the sportsbooks’ on-ramp to prediction markets.
Whereas “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 Information reported final month the CME deliberate to launch sports-event contracts by the tip of the 12 months. Terry Duffy, the corporate’s CEO, clarified that sports activities has at all times 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.
“So long as the U.S. authorities will not be going to object to the self-certification of those and contemplate these swaps and never gaming … we'll proceed accordingly,” Duffy mentioned on CME’s Q3 earnings name in October.
DraftKings bullish
A dip in sportsbook shares has come together with the rise of prediction markets. The alternatives that await, although, have Robins optimistic.
In different information yesterday, DraftKings introduced a deal to change into ESPN’s official sportsbook and odds supplier, following information that PENN Leisure and the sports activities media big are shutting ESPNBet.
“That is probably the most bullish I've ever felt about the way forward for DraftKings,” Robins informed shareholders and analysts. “Which will sound shocking given we're revising our fiscal 12 months 2025 steering ranges as we speak, nonetheless, underlying progress in our enterprise is accelerating. We're additionally more and more advantaged by new unique advertising and marketing agreements with ESPN and NBCUniversal in addition to our main product choices persevering with to enhance. Lastly, we're launching DraftKings Predictions within the coming months.”
In his usually daring trend, Robins added of prediction markets, “We are going to pursue this chance, we'll compete, and we'll win. For a similar causes that we have now been profitable competing within the sports activities betting business, we count on to succeed right here.”
