- DraftKings has acquired prediction market company Railbird to launch its DraftKings Predictions app.
- The acquisition follows weekly prediction market volumes surpassing $2 billion for the first time.
- Railbird holds a designated contract market license from the Commodities Futures Trading Commission (CFTC).
- The new app will initially focus on states without legal sports betting and will offer contracts in areas like finance, culture, and entertainment.
- The prediction market industry is expanding rapidly, with strong recent acquisitions by other companies and some legal challenges over jurisdiction.
DraftKings purchased prediction market firm Railbird for an undisclosed sum to introduce the DraftKings Predictions mobile app. The deal was announced on Tuesday after stock markets closed. A person familiar with the plans said the app will primarily target U.S. states that currently do not have legal sports betting.
Prediction market activity has recently grown, with total weekly volume exceeding $2 billion for the first time. According to a Certuity report, prediction markets are projected to reach $95.5 billion by 2035, growing annually at 46.8%.
Railbird obtained a designated contract market license from the CFTC in June, enabling it to self-certify and offer event contracts. DraftKings said the app will feature contracts related to finance, culture, and entertainment. The company also noted that the app will connect to multiple exchanges, with plans to expand into further categories, potentially including sports event contracts.
Earlier this year, the prediction market sector saw significant movements. Polymarket, the current volume leader, acquired a CFTC-licensed derivatives exchange for $112 million and began self-certifying event contracts. Kalshi, another early player, is engaged in legal disputes with states and Native American tribes concerning jurisdiction issues. These companies operate under the premise that CFTC regulation exempts them from obtaining state-level licenses.
As of August, DraftKings held 29 sports betting licenses, including one recently acquired in Missouri. However, some states have warned that introducing prediction markets could jeopardize existing regulated gambling licenses, according to sports betting expert Paul Zilm.
“Some states they already operate in have been vocal that launching prediction markets in their states may jeopardize their regulated gambling license,” Zilm said.
“We believe that Railbird’s team and platform—combined with DraftKings’ scale, trusted brand, and proven expertise in mobile-first products—positions us to win in this incremental space,” stated DraftKings CEO Jason Robins. “This is a transformational moment for our company, and we are thrilled to be a part of the future of DraftKings,” added Railbird CEO Miles Saffran.
On the Nasdaq, DraftKings shares rose 0.06% to $33.62 at market close Tuesday and increased 3.21% in pre-market trading Wednesday to $34.60.
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