If You Can't Beat Them, Join Them? "US Sports Betting Giant" Draftking Acquires Licensed Exchange, Joins the "Prediction Market" Battle

US sports betting giant DraftKings has officially entered the prediction market sector by acquiring a federally regulated trading platform, marking the company’s most aggressive move yet in response to emerging competitive threats.

On October 22, according to reports, DraftKings announced on Tuesday (October 21) the acquisition of Railbird Technologies Inc., a trading platform licensed by the US Commodity Futures Trading Commission (CFTC), seeking to open up new territory beyond sports betting and meet users’ demand to wager real money on future events.

After the news was announced, DraftKings’ share price rose as much as 8.3% in after-hours trading. The stock had been under pressure for months due to the rise of prediction markets, and last week was hit further by media reports that CME Group was preparing to enter the sports betting sector.

This acquisition positions DraftKings to become one of the first sports betting companies to offer federally regulated event contracts, but also thrusts it into a regulatory arms race—Wall Street financial giants and gaming regulators are fiercely competing in the prediction market sector.

Defensive Strategy Turns Offensive

For betting companies whose share prices have recently been under pressure, this acquisition represents a strategic shift.

Citizens equity analyst Jordan Bender stated that acquiring Railbird will enable DraftKings to fight back against competitors and, by entering states like California and Texas where traditional sports betting is banned, potentially double its addressable market size.

"The announcement around the strategy should reassure investors; while prediction markets had pressured the stock for months, the unknowns have now turned into an offensive strategy."

In recent months, betting company stocks have generally struggled, with the rise of prediction markets seen as a threat to their business models. Emerging platforms like Kalshi and Polymarket recorded record trading volumes last week, partly driven by sports event wagers.

New Business Layout and Regulatory Challenges

DraftKings plans to launch "DraftKings Predictions" on its mobile app, where users will be able to trade yes/no outcome contracts related to finance, culture, and entertainment. The company’s CEO and co-founder Jason Robins stated in a press release:

"We are excited about the additional opportunities that prediction markets could bring to our business."

A DraftKings spokesperson said the company has not yet decided whether to offer contracts related to sports events.

According to reports, this cautious attitude reflects potential regulatory resistance—state gaming regulators have signaled they will not allow companies under their jurisdiction to simultaneously offer federally regulated event contracts.

Several emerging platforms such as Kalshi and Polymarket have already been criticized by state regulators for using federal licenses to offer sports-related wagers in jurisdictions where local laws prohibit them.

Blurring Boundaries Between Finance and Gaming

This acquisition comes at a time when the boundaries between Wall Street and the gaming industry are increasingly blurred.

Financial industry competitors such as CME and Intercontinental Exchange are weighing how to leverage their licenses to enter betting-related markets. CME previously announced a partnership with FanDuel to offer event contracts linked to financial markets and economic indicators.

Railbird was founded in 2021 by two former analysts from Point72 Asset Management (the hedge fund run by Steven Cohen), participated in the Y Combinator accelerator program, and in June this year received CFTC approval as a designated contract market.

Analysts point out that this cross-industry competition highlights the enormous commercial potential of prediction markets, as well as the tension between federal and state regulatory authority, and is expected to reshape the landscape of both the gaming and financial derivatives industries.