DraftKings launches prediction market amid fight over sports betting
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Blu DeTiger spins at DraftKings x Sports Illustrated Augusta After Dark presented by Homes.com on April 9 in Augusta, Georgia. Photo: Vivien Killilea/Getty Images for DraftKings
DraftKings — which runs one of the two largest sportsbooks in the U.S. — has launched its long-anticipated prediction market, embracing a surging alternative format to traditional online gambling.
Why it matters: The rise of prediction markets such as Polymarket and Kalshi has upended the betting landscape, allowing users to risk money on sports outcomes even in states that haven't legalized wagering.
Driving the news: DraftKings Predictions goes live Friday morning in 38 states, including Texas and California, the two biggest states that haven't legalized traditional sports betting.
- The service operates under the regulatory structure of the Commodity Futures Trading Commission (CFTC), a federal agency — unlike DraftKings Sportsbook, which is regulated by state gaming commissions.
- It will initially provide financial "event contracts" in all states where it's live, plus sports markets in states where DraftKings hasn't been approved for a regulated sportsbook, DraftKings chief product officer Corey Gottlieb tells Axios.
Eventually, DraftKings Predictions will provide markets on politics, entertainment and other events, Gottlieb said.
- Customers with existing DraftKings accounts will be able to use their individual log-ins to access DraftKings Predictions but will not be able to use funds from their sportsbook wallet on the prediction market product.
The intrigue: DraftKings Predictions won't initially offer the ability to risk money on two events via one transaction — what sportsbooks would call a parlay.
- Parlays are the most profitable bets for sportbooks.
- Kalshi recently launched "combos," a version of parlays.
- Gottlieb said it's a feature that DraftKings Predictions could eventually add.
State of play: Unlike Kalshi, for example, DraftKings Predictions isn't going live in all 50 states.
- States where it won't be available at all: Washington, Montana, Arizona, Nevada, Iowa, Illinois, Arkansas, Tennessee, Ohio, Pennsylvania, New Hampshire and Maine.
- Gottlieb said the decision on each individual state stems from the company's conversations with officials there: "A lot of it is rooted in the fluidity of states and regulators forming their perspective on the space."
Friction point: The launch of prediction markets by the likes of DraftKings and Fanatics, whose prediction market is already live, places them in conflict with land-based casinos, which have argued prediction markets are unlawful.
- DraftKings, Fanatics and FanDuel, whose own prediction market service is imminent, recently left the American Gaming Association over the topic.
- The AGA, whose members include casino chains MGM and Caesars, has launched a campaign against prediction markets.
What we're watching: It remains to be seen how fees will work on DraftKings Predictions.
- Gottlieb declined to articulate the revenue model.
- With traditional sportsbooks, the house wins when the bettor loses. Prediction markets, however, typically charge fees based on each transaction.
- "We think this will be a very big industry long term," Fanatics Betting and Gaming CEO Matt King told Axios in a recent interview. "We think it 'll be a profitable one for us."
The bottom line: Prediction markets are disrupting sports betting, but the jury is out on how many bettors will gravitate away from conventional sportsbooks.
- "How big is that disruption going to be for the existing sports betting industry? That's hard to say, but I think it's more than a nothingburger," gambling industry consultant Dustin Gouker wrote in his newsletter, The Closing Line.
