Prediction markets go mainstream as DraftKings, FanDuel enter the fray
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Prediction markets are going more and more mainstream by the day despite recent sports gambling scandals.
Why it matters: About a dozen states haven't yet legalized sports betting — and there's little momentum toward doing so — but prediction markets are quickly filling in the gap.
The big picture: Several developments show how quickly prediction markets are flooding the scene.
- DraftKings and FanDuel — the market share leaders in American sports gambling — announced in recent days that they are launching their own prediction market products in 2025 in states where sports betting isn't currently legal.
- Robinhood rolled out sports event contracts earlier this year.
- UFC owner TKO announced Thursday that Polymarket data "will power the first-ever real-time Fan Prediction Scoreboard within UFC broadcasts," measuring "the unofficial 'pulse' of the audience in real time" for each fight.
Its momentum has attracted attention outside of sports as well: Yahoo Finance is integrating Polymarket probabilities into its investor tools.
- And Intercontinental Exchange, the New York Stock Exchange's parent company, agreed in October to invest up to $2 billion for a 20% stake in Polymarket.
State of play: Gambling scandals in MLB, the NBA, UFC and college basketball have called attention to the risks of the widespread availability of sports gambling.
- But with the Commodity Futures Trading Commission allowing the event contract model to spread nationwide, it's "fantasy land" to believe that sports prediction markets won't maintain their momentum for the foreseeable future, according to sports gambing analyst Dustin Gouker.
What they're saying: "Prediction markets may eventually lose the battle on sports betting in court, but that is absolutely not a certainty, and probably years away," Gouker wrote in his newsletter The Closing Line.
- "And at best it's a coin flip? And even if sports prediction markets go away, I think everything else in prediction markets is going to survive," he said.
Friction point: The spread of sports betting through prediction markets could spark clashes with anti-gambling lawmakers — especially in holdout states like Texas and California.
- Any policymakers who oppose the spread of prediction markets would be coming up against Trump family interests, however — as Donald Trump Jr. has close ties to prediction market leaders Kalshi and Polymarket.
What we're watching: A big question now is whether DraftKings and FanDuel quickly ascend to the top of the prediction markets heap — and whether they run into regulatory problems in states where they currently hold sports gambling licenses.
- Both are expected to offer sports prediction markets only in states where they currently don't have licenses to offer betting through their regulated sportsbooks.
They're already facing pushback in Nevada, where they have given up on pursuing sports gambling licenses with plans to instead offer prediction markets there.
- Nevada Gaming Control Board chairman Mike Dreitzer said Wednesday in a public notice that the move by FanDuel and DraftKings to offer sports prediction markets in the state amounts to "unlawful activities" and is "incompatible with their ability to participate in Nevada's gaming industry."
The bottom line: The battle isn't over, but prediction markets are mounting a furious charge.
