DraftKings Launches Prediction Markets App Under CFTC Framework

DraftKings Inc., the publicly traded US-based sports betting and entertainment company, is expanding into prediction markets with the launch of its new app, DraftKings Predictions. The platform allows users to trade contracts on real-world outcomes in sports and financial events and is expected to extend into crypto, entertainment, and cultural events in the future according to Seeking Alpha. This move follows a growing trend of regulated event-based trading in the United States.

The app is currently available in 38 states, with sports-related trading permitted in 17 of them, including key markets like California, Texas, and Florida per Cointelegraph. DraftKings has taken a cautious approach, avoiding states where it already operates as a traditional sports betting company due to regulatory uncertainty. The company emphasized that its offering is regulated by the US Commodity Futures Trading Commission (CFTC), distinguishing it from traditional gambling products.

DraftKings said it will route trades through Railbird Exchange, a derivatives venue it acquired and which is registered with the CFTC. This provides a legal framework for event-based trading and aligns the company with broader financial market standards. The expansion into prediction markets is seen as a strategic move to diversify its revenue streams beyond sports betting and into a fast-growing sector.

Why the Standoff Happened

Prediction markets operate in a gray area between finance and gambling, and their legal status varies by state. Some state regulators have raised concerns that offering such markets could jeopardize existing sports betting licenses. DraftKings has been mindful of this, carefully selecting jurisdictions where it can launch the product without conflicting with its current regulatory relationships.

The company's prediction market app is not built on blockchain or decentralized technology but is part of a broader market shift toward regulated event-based trading. Crypto-native platforms like Polymarket and Kalshi have already demonstrated the appeal of prediction markets using blockchain, creating a surge in interest from both retail and institutional participants. DraftKings is now entering this space with a more traditional, derivatives-based approach.

How Markets Reacted

DraftKings' foray into prediction markets is gaining traction among investors and industry observers. The company reported $1.14 billion in revenue for the third quarter of 2025, with an adjusted loss of $127 million. It expects to generate up to $6.1 billion in revenue this year, more than tripling the amount it generated in 2022. The company's stock rose 1.4% in premarket trading following the announcement of the new app according to Investing.com. The market reaction reflects optimism about the potential of prediction markets to drive user engagement and revenue growth. DraftKings is also promoting the app with incentives such as a $1 million prize pool and trade bonuses in certain states as reported by Investing.com. The company is betting that its national reach and established brand will give it an edge in the competitive prediction market space, where platforms like Kalshi, Polymarket, and Bitnomial are already active.

What Analysts Are Watching

Industry observers are closely monitoring how DraftKings and other major players navigate the regulatory landscape. The Commodity Futures Trading Commission's approval of platforms like Kalshi has created a precedent for regulated prediction markets, but the absence of a unified federal framework means that state-level regulations can vary widely. Coinbase, another major player, has recently taken legal action in Connecticut, Illinois, and Michigan to assert that prediction markets fall under federal jurisdiction and are not subject to state gambling laws according to Yahoo Finance. This legal battle highlights the broader debate about whether prediction markets are financial derivatives or forms of gambling. The outcome of these cases could have significant implications for the future of the industry.

Meanwhile, crypto infrastructure providers like Bitnomial Clearinghouse are also expanding into prediction markets, signaling growing institutional interest in the space according to MENAFN. Bitnomial recently received CFTC approval to clear fully collateralized swaps linked to cryptocurrency and macroeconomic events, further legitimizing the sector.

What This Means for Investors

For investors, the expansion of prediction markets into regulated financial infrastructure represents a new asset class with potential for high engagement and innovation. Platforms like DraftKings and Kalshi are creating opportunities for users to trade on events ranging from sports outcomes to economic data releases and political elections.

However, the regulatory environment remains uncertain, and investors should be aware of the risks associated with state-level restrictions and enforcement actions. Companies that operate within the CFTC's regulatory framework are more likely to sustain long-term success, while those that fail to comply with federal and state laws may face legal challenges or operational limitations.

As the industry continues to evolve, the coming years will likely see more clarity in regulatory definitions and frameworks, particularly as bipartisan efforts in the US Congress aim to establish a comprehensive crypto and derivatives regulatory structure by early 2026 according to Bitcoin World. Until then, players in the prediction market space must balance innovation with compliance to navigate the complex legal terrain.