DraftKings (DKNG.US) acquires Railbird, shaking up the prediction market. Leveraging DCM licenses to enter "unregulated states" such as California, Texas, and others.

The sports betting industry is currently discussing the acquisition of Railbird by DraftKings (DKNG.US). The reason this deal is receiving attention is because Railbird earlier this year received approval from the U.S. Commodity Futures Trading Commission (CFTC) to become a "Designated Contract Market (DCM)." This license allows Railbird to operate in the United States as a regulated futures exchange, with its business scope covering "event contracts" used by prediction market platforms such as Kalshi (KALSHI) and Polymarket (POLYMARKET). As part of its new business strategy, DraftKings has also confirmed plans to launch a mobile app called "DraftKings Predictions." This app will allow users to trade regulated event contracts on real-world outcomes in areas such as finance, culture, and entertainment. It is worth noting that the announcement of the trading did not mention the "sport" field, but the market generally expects the company to enter this category in the future. Prior to DraftKings' acquisition of Railbird, Flutter Entertainment (FLUT.US) announced that its subsidiary FanDuel will partner with the Chicago Mercantile Exchange Group (CME) to launch prediction and event contract businesses in the United States, initially focusing on financial contracts. CBRE Group, Inc. Class A (CBRE) analyst John DeCler updated report states: "We believe that acquiring customers in unregulated states and product/technology development are the main commercial motivations for current online sports betting (OSB) operators entering the prediction market." He added, "If the legal definition of sports contracts is clarified, we believe both DraftKings and Flutter will be able to quickly and efficiently enter this field." DeCler and his team believe that even if the legal definition is not clear, the prediction market will create a "policy push" for those states that have not yet opened online sports betting for substantial tax revenue. Needham analysts point out that the acquisition of Railbird is expected to boost DraftKings' current low market sentiment. Analyst Bernie McTeeran stated that this deal means DraftKings' Total Addressable Market (TAM) will expand, enabling them to enter states that have not yet opened regulated online sports betting, such as California, Texas, and Florida. Bank of America Corp analyst Shaun Kelly said that DraftKings' announcement not only partially fills its strategic response gap to the "prediction market threat," but also reflects the company's sense of urgency and awareness of the rapidly changing market landscape. In other news from the prediction market sector, the National Hockey League (NHL) has signed agreements with Polymarket (POLYMARKET) and Kalshi (KALSHI) to allow these two companies to use its trademark. Previously, the NHL had similar trademark partnerships with DraftKings, FanDuel (a subsidiary of Flutter), and BetMGM. In pre-market trading, DraftKings' stock price rose by 3.15%, while Flutter Entertainment (FLUT.US) saw a 1.27% decrease in its stock price.