DraftKings Mulls Prediction Market Entry

• Sportsbook operator submitted filing for “DraftKings Predict”
• Could be acknowledgement of potential threat from Kalshi, others

An entity with ties to DraftKings (NASDAQ: DKNG) submitted a filing with the National Futures Association (NFA) for a business called “DraftKings Predict,” signaling the sportsbook operator could eventually enter the growing prediction market arena.

The NFA was granted designation as a “registered futures association” by the Commodities Futures Trading Commission (CFTC) in 1981 and commenced regulatory operations the following year. The CFTC is the regulatory body to which operators of prediction markets, including industry leader Kalshi, answer. NFA funding is primarily derived from membership dues and fees paid by exchanges, not taxpayer dollars.

DraftKings Predict is currently classified as a pending member of the NFA. The filing was submitted by Gus II LLC and included a DraftKings address and phone number. Co-founder and CEO Jason Robins were among the names mentioned in the filing, and it appears that if DraftKings Predict comes to life, co-founder Paul Liberman will be its chief executive officer.

DraftKings May Have Seen Prediction Market Future

The DraftKings NFA filing is dated July 30, 2024. That timing is arguably interesting and for reasons beyond the fact that it was several months before the US presidential election, an event that brought prediction markets into the mainstream wagering conversation.

It’s likely not lost on DraftKings that some of its clients, including its core constituency of Gen Z and millennial men, are also Crypto.com or Robinhood customers. Those companies also have an advantage not possessed by DraftKings and other gaming companies: they’re federally regulated so they can offer event contracts in all 50 states whereas sports wagering is live and legal in just 38 states.

It’s not clear if that privilege would extend to DraftKings and other gaming companies that might enter the event contracts industry.

Robins Has Previously Discussed Prediction Markets

The DraftKings Predict filing jibes with comments, including some recent ones, by Robins that indicate the company is at least monitoring the space. He confirmed as much earlier this month at the Morgan Stanley Technology, Media & Telecom Conference.

I mean I think it’s definitely more on the opportunity side, but we have to see how this plays out. The CFTC is reviewing it now and I think expected to have an official ruling in mid-April,” he told analyst Stephen Grambling. “So I think that will obviously be an important thing to see. And we’re watching it carefully and looking at what happens there because if there is an opportunity that presents itself, we want to make sure we’re prepared for it. But that’s a big moment that we’re all still kind of waiting to see what happens on.”

On February 5, the CFTC announced that it would hold an event contracts roundtable in approximately 45 days to “develop a robust administrative record with studies, data, expert reports, and public input from a wide variety of stakeholder groups to inform the Commission’s approach to regulation and oversight of prediction markets, including sports-related event contracts.”