Chavdar Vasilev is a gambling news writer with several years of experience in the iGaming industry. He started creating promotional content but soon found he loved reporting on the industry itself. Since then, he’s delivered...
Read Full BioDraftKings is reportedly in advanced talks to acquire Railbird Exchange, a prediction markets platform which recently received approval from the Commodity Futures Trading Commission (CFTC).
Front Office Sports broke the news on Monday. Neither company has confirmed the news, with a DraftKings spokesperson telling FOS that its discussions with other businesses are part of normal operations.
While unconfirmed, the move signals DraftKings’ strong interest in a highly debated market that offers an alternative under federal oversight to traditional sports betting. Notably, DraftKings applied for a market prediction license but withdrew the application in April.
Railbird was founded in 2021 by Miles Saffran and Edward Tian, former Point72 Asset Management executives. Point72 is the family office run by former hedge fund boss Steven Cohen.
Railbird is yet to launch, but it has secured the regulatory approval to operate nationwide. For DraftKings, a potential acquisition would mean a shortcut to access prediction platforms without going through the lengthy licensing process it would have if it continued with its application.
As prediction markets are federally regulated, DraftKings would also significantly benefit from getting access to a new customer base. That includes the nation’s largest states, California and Texas, where sports betting remains illegal.
The move would be strategic as many observers expect a wave of consolidation between sportsbooks and prediction markets ahead of the football season.
FanDuel Explores Partnership with Kalshi
DraftKings is not the only one eyeing prediction markets. Last month, reports surfaced that FanDuel is exploring a deal with Kalshi, the leading prediction markets platform in the US. However, unlike DraftKings, FanDuel is potentially looking into a partnership rather than an acquisition.
A potential partnership would be beneficial to both companies. FanDuel would enter new markets from a ‘sports betting’ perspective, adding to its existing DFS product in many states.
The sports betting market leader would also gain access to new “betting” verticals. Furthermore, the deal would help alleviate state tax burdens, as Kalshi falls under CFTC oversight.
Meanwhile, Kalshi would benefit from getting exposure to FanDuel’s 12 million active users. The company may also gain access to FanDuel’s advanced tech-stack, including payments and compliance infrastructure.
That could help Kalshi boost liquidity across markets. With a large influx of new users, the market volume could rise, making them more efficient and engaging. Through FanDuel, Kalshi could also receive more exposure and become a household name.
FanDuel or Kalshi have not confirmed the possible partnership. Still, these discussions highlight the intense interest among major operators in blending prediction markets with more traditional wagering products.
Kalshi Faces Legal Challenges Despite Federal Backing
Kalshi has experienced rapid growth, especially since the beginning of the year when it started offering sports event contracts. However, the growth has not come without significant legal pushback.
Several states have raised the alarm and claim that Kalshi’s sports event contracts are a form of illegal gambling. Regulators from states like Nevada, New Jersey, Maryland, and Ohio sent Kalshi cease-and-desist letters, arguing that the events violate state gaming laws.
In response, Kalshi launched legal challenges asserting that its operations fall under federal law and thus preempt state restrictions. The platform scored some early wins, with judges blocking the cease-and-desist orders in New Jersey and Nevada.
At the heart of the dispute between Kalshi and the states is whether event contracts, and sports event contracts in particular, should be regulated as financial derivatives or traditional bets.
In the Maryland case, a judge questioned Kalshi’s conflicting statements on the matter. The prediction markets platform’s claim that event contracts fall under CFTC oversight collided with an earlier argument that those same contracts lack economic significance, thus not falling under CFTC governance.
The outcome of the Maryland case could have far-reaching implications for the gambling industry and the future of state versus federal oversight.
A Transformative Moment for US Betting
The outcome of Kalshi’s legal battles could reshape the US betting as prediction markets could become the next frontier of expansion.
Both FanDuel and DraftKings are already signaling interest, potentially laying groundwork to leverage shared exchange-sports betting infrastructure. That will allow them to enter new markets and potentially sidestep state gambling taxes.
Adding momentum, CFTC Chair nominee Brian D. Quintenz has signaled openness to expanding sports prediction markets under federal oversight. If the courts affirm federal preemption over state laws, these platforms will undoubtedly experience rapid expansion.
Prediction markets can also offer sportsbooks a way to engage users in the off-season through different “betting” categories. Examples include politics and macroeconomic indicators.
As the lines between sports betting and sports event prediction markets continue to dissolve, the next few months could be critical for the future of sports betting in the US.
