DraftKings Enters Prediction Markets With CFTC-Backed App Push

DraftKings Launches Standalone Predictions App Under CFTC Oversight

DraftKings Inc. (NASDAQ:DKNG) has launched a standalone predictions app called DraftKings Predictions, formally entering the federally regulated prediction markets under the oversight of the U.S. Commodity Futures Trading Commission (CFTC) according to reports. The app allows users to trade event contracts based on real-world outcomes, including sports and financial markets, and is separate from the company's core sportsbook offering according to Coindesk. The product is expected to expand the company's reach to states where online sports betting is not currently legal.

The launch of DraftKings Predictions comes after months of strategic signaling from company executives that prediction markets could help the firm access a broader customer base without cannibalizing its traditional online sports betting business according to financial reports. DraftKings' CEO Jason Robins had previously stated that prediction markets could significantly increase the company's total addressable market according to Bloomberg. The app will be available in 38 states, including major markets like California and Texas, where online sports betting remains prohibited according to investing.com.

To operate the app, DraftKings will initially route trades through the CME Group and plans to integrate Railbird Technologies, a CFTC-regulated exchange it recently acquired according to a company press release. The company also announced that Polymarket will serve as the designated clearinghouse for the platform, following its acquisition of Railbird. The integration of Railbird is expected to enhance the range of available markets and improve the platform's economics over time according to market analysis.

Why the Standoff Happened

Prediction markets have recently gained traction as platforms like Polymarket and Kalshi expand into sports-related contracts and attract growing trading volumes according to Seeking Alpha. The market for prediction-based trading has surged in popularity, with platforms reporting billions in trading volume. Kalshi, for instance, recorded more than $5.8 billion in trading volume in November 2025, significantly outpacing Polymarket's $1.8 billion according to Next.io. This rapid growth has intensified competition for traditional gambling operators and prompted new entrants like DraftKings to enter the space.

DraftKings' decision to enter the prediction market space is also influenced by the regulatory environment. Unlike state gaming regulators, the CFTC does not require the same level of consumer protections for monitoring and enforcement of insider trading and manipulation. This has raised concerns from sports leagues and state regulators, who argue that prediction markets lack the safeguards seen in traditional gambling operations. However, DraftKings plans to incorporate responsible trading tools, including deposit limits and self-exclusion options, to mitigate these concerns.

Risks to the Outlook

Despite the strategic move, DraftKings faces significant challenges in the prediction market space. The company is entering a market dominated by early adopters such as Kalshi and Polymarket, which already have a strong user base and infrastructure in place. Additionally, the company will need to invest heavily in marketing and product development to build brand awareness and attract users. The prediction market platform also requires significant R&D investment to integrate new payment systems and support features like crypto-based trading.

Another challenge is the regulatory landscape, which remains uncertain and evolving. Arizona recently stripped a fantasy sports platform of its license due to its relationship with a prediction market operator, raising concerns about the regulatory risks for companies operating in the space. While DraftKings and FanDuel have taken a cautious approach by routing trades through CME Group and acquiring Railbird, other operators like Fanatics and PrizePicks face greater regulatory exposure. The inconsistent regulatory approach in different states could further complicate the growth of prediction markets.

What This Means for Investors

For investors, DraftKings' entry into the prediction market space is both an opportunity and a risk. The company sees prediction markets as a way to expand its total addressable market without cannibalizing its core sports betting business. DraftKings has also indicated that the platform could eventually expand into new categories such as entertainment and crypto. However, the company has not seen material impact from prediction markets on its sportsbook business so far, and it remains unprofitable despite significant revenue growth.

Analysts are watching closely how DraftKings balances growth in the prediction market with profitability. While the company has seen a 25% rebound in share price since an early November low, concerns remain about its ability to compete with established platforms and navigate the evolving regulatory environment. The company's recent acquisition of Railbird is seen as a strategic move to provide flexibility in adapting to regulatory changes over time.