DraftKings took a significant step towards entering the prediction markets sector with the registration of its new venture, DraftKings Predict, with the National Futures Association (NFA). The move could indicate that the sportsbook and iGaming giant is seeking opportunities beyond traditional wagering, particularly in the emerging space of event-based contracts.
The NFA registration was filed under the name Gus II LLC in July of last year and includes DraftKings' headquarters and contact details, again linking it more firmly to the project. DraftKings co-founder Paul Liberman is named as CEO of DraftKings Predict, with current DraftKings CEO Jason Robins as an indirect owner.
Predictive markets allow customers to wager on the outcome of various future events, including political elections, economic indicators, and even entertainment awards. They have gained more popularity over the past few years, but their legality is an ongoing regulatory debate.
The Commodity Futures Trading Commission (CFTC), which regulates the U.S. derivatives markets, has traditionally had a restrictive view of prediction markets, particularly event contracts on politics and sports. Regulatory attitudes are possibly softening, however. A one-time board member of the prediction market company Kalshi, Brian Quintenz, is now chair of the CFTC, prompting speculation that the agency will be more open to these markets.
On DraftKings' most recent earnings call, Jason Robins expressed interest in prediction markets, noting the company closely monitored the regulatory situation. He stated that it's an area the company has a "keen interest" in entering.
Potential regulatory hurdles ahead
While interest in prediction markets grows, legal obstacles remain a significant challenge. The CFTC has announced a hearing on the viability of event contracts related to sports, a move toward assessing the regulatory and legal risks of expanding prediction markets in the United States.
Regulatory backlash is already occurring at the state level. The Nevada Gaming Control Board (NGCB) recently sent Kalshi a cease-and-desist letter questioning the legality of event-based contracts. Industry watchers say the NGCB's position could act as a bellwether for how other state regulators will respond to prediction market operators.
Still, if the CFTC eventually greenlights a regulatory framework for prediction markets, operators such as DraftKings might use this decision to offer services nationwide, possibly bypassing prohibitive state gambling laws.
According to the agency's website, DraftKings' NFA registration is pending, and its next move will likely be determined by the CFTC's upcoming ruling on event contracts. Assuming regulators are accommodating, DraftKings Predict could be a major player in the prediction markets industry on the strength of its existing user base and brand.
As one of the biggest operators in the sports betting sector, DraftKings' entrance into this space could catalyze broader industry adoption and innovation within prediction markets.
