DraftKings (NASDAQ:DKNG) is making a dramatic move into the predictions market business through the acquisition of Railbird Technologies, which is a federally licensed exchange designated by the Commodity Futures Trading Commission. The sports betting company said the acquisition supports its broader strategy to enter prediction markets, expanding its addressable opportunity through regulated event contracts.
Railbird’s team and proprietary technology are seen establishing a strategic foundation for DraftKings’ (NASDAQ:DKNG) future growth in this space, enabling advantaged economics and long-term product differentiation.
“We are excited about the additional opportunity that prediction markets could represent for our business,” stated DraftKings (DKNG) CEO Jason Robins. “We believe that Railbird’s team and platform—combined with DraftKings’ scale, trusted brand, and proven expertise in mobile-first products—positions us to win in this incremental space,” he added.
As part of its new business strategy, the company also confirmed plans to launch DraftKings Predictions, which will be a mobile application that will allow customers to trade regulated event contracts on real-world outcomes across finance, culture, and entertainment. Notably, sports was not mentioned in DKNG’s press release. The prediction market product will have the flexibility to connect to multiple exchanges, enabling DraftKings (DKNG) to offer one of the broadest suites of markets to its customers. Its offering may expand into additional categories over time, potentially deepening customer engagement and extending DraftKings’ (DKNG) addressable audience.
Jefferies analyst David Katz thinks the development is a positive for DraftKings (DKNG). “DKNG’s move to purchase Railbird signals an in-house approach to prediction markets, with DKNG developing product and retaining economics with its own DCM,” he updated. Regarding sports, Katz and his team believe that the entry of regulated OSB operators in non-legalized states with predictions should apply pressure for those states with some interest in legalizing to do so. The expectation is that legalized states could evolve toward regulating predictions, thereby creating a competitive marketplace that generates tax revenue.
The DraftKings (DKNG) development is of interest to Kalshi (KALSHI), Polymarket (PLOYMARKET), FanDuel (FLUT), and BetMGM (MGM) (OTCPK:GMVHF).