Can't beat them, join them? "US sports betting giant" DraftKing acquires licensed exchange, joins the "prediction market" battle

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U.S. 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, it was reported that DraftKings on Tuesday (October 21) announced the acquisition of Railbird Technologies Inc., a trading platform licensed by the U.S. Commodity Futures Trading Commission (CFTC), seeking to open a new battleground beyond sports betting and meet users’ demand for wagering real money on future events.

After the news was released, DraftKings’ stock price rose by 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 was hit last week after media reported that CME Group was preparing to enter sports betting.

This acquisition makes DraftKings likely to become one of the first sports betting companies to offer federally regulated event contracts, but it also pushes it into a regulatory arms race—with Wall Street financial giants and gaming regulators fiercely contending in the prediction market field.

From Defensive to Offensive Strategy

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

Citizens stock analyst Jordan Bender said, acquiring Railbird will allow DraftKings to fight back against competitors and, by entering states like California and Texas that ban traditional sports betting, double its accessible market size.

"This strategic announcement should reassure investors; the prediction markets have pressured the stock price for several months, but now the unknowns have turned into an offensive strategy."

In recent months, gambling companies’ stock prices have generally struggled, with the rise of prediction markets seen as a threat to their business model. New platforms such as Kalshi and Polymarket posted record trading volumes last week, partly driven by wagers on sporting events.

New Business Initiatives and Regulatory Challenges

DraftKings plans to launch “DraftKings Predictions” on its mobile app, allowing users to trade yes/no binary contracts related to finance, culture, and entertainment. The company’s CEO and co-founder Jason Robins said in a statement:

"We’re excited about the additional opportunities prediction markets could bring to our business."

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

The report notes that this cautious approach reflects potential regulatory resistance—state gaming regulators have signaled they will not allow the companies they supervise to offer federally regulated event contracts at the same time.

Several emerging platforms, such as Kalshi and Polymarket, have already been criticized by state regulators for using federal licenses to offer sports-related bets in jurisdictions where such gaming is prohibited by local law.

The Blurring Line Between Finance and Gambling

This acquisition comes as the boundaries between Wall Street and the gaming industry grow increasingly blurred.

Financial industry competitors like CME and ICE are weighing how to leverage their licenses to enter gaming-related markets. CME previously announced a partnership with FanDuel to provide event contracts tied to financial markets and economic indicators.

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

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, which is expected to reshape the landscapes of both gambling and financial derivatives industries.

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