DraftKings (DKNG) and Flutter Entertainment’s (FLUT) FanDuel both resigned from the American Gaming Association this month amid a disagreement about how the U.S. gaming industry should approach prediction markets.
The American Gaming Association, which represents casino operators such as MGM Resorts International (MGM), Caesars Entertainment, and Wynn Resorts, maintains that prediction markets operate outside traditional state regulatory frameworks and sidestep responsible gaming and consumer protection rules. The AGA supports state-level oversight of prediction markets instead of federal oversight through the CFTC.
However, the two sports betting giants have gone their own way. FanDuel, in partnership with CME Group, is launching its FanDuel Predicts prediction market platform in December. FanDuel, in partnership with CME Group, is launching its “FanDuel Predicts” prediction market platform in December. The app will initially be available in states where traditional online sports betting is still prohibited, letting users wager on various sports outcomes and CME-listed benchmarks. Meanwhile, DraftKings (DKNG) has plans for a DraftKings Predictions platform, targeting launch by year-end 2025 or early 2026, pending regulatory approval. The platform will debut in states without a DraftKings Sportsbook location.
Weighing in on the development, Needham analyst Bernie McTernan thinks prediction markets could drive online sports betting legislation to new states over the medium term and stand as a warning to states looking to increase tax rates on the industry.
The U.S. states that do not have legalized sports betting are Alabama, Alaska, California, Georgia, Hawaii, Idaho, Minnesota, Oklahoma, South Carolina, Texas, and Utah. Those states all prohibit sports wagering, with legislative efforts either stalled, blocked, or yet to materialize in their respective legislatures. Florida, Minnesota, and Wisconsin only have limited legalized sports betting.
Looking ahead, McTernan pointed to DraftKings’ (DKNG) major multi-year partnership with ESPN (DIS) to be the exclusive official sportsbook and odds provider for the media giant to be a general positive and a helpful factor in the launch of a prediction market product due to ESPN’s nationwide scale.
Shares of DraftKings (DKNG) are down 14.3% over the last six weeks, while Flutter Entertainment (FLUT) is off 23%.