The top U.S. online sports betting operators, FanDuel and DraftKings, are officially gearing up to enter the prediction market space, with the new products slated to launch in the coming months.
The sportsbook heavyweights decided that the risks of getting into prediction markets (namely, putting their iGaming licenses in peril in certain states), were worth the rewards. That decision just resulted in FanDuel and DraftKings resigning as members of the American Gaming Association (AGA) on Monday. The OSB giants’ prediction market entries come amid an explosion of interest in trading on event outcomes at federally-regulated exchanges like Crypto.com and Kalshi, whose sports event contracts have become leading trading volume drivers.
To combat prediction platforms’ threat to their market share and potentially resurrect plummeting stock prices that seem to fall with each piece of positive prediction market news, FanDuel and DraftKings are attempting to turn the tables with the introduction of their new prediction verticals. Leveraging their large user bases, the titans of online sports betting are hoping to challenge the major prediction exchanges on their own turf to stave off any further damage. Plans include a FanDuel Predicts launch in December while DraftKings will take DraftKings Predictions live “in the coming months.”
Similar to the post-PASPA sports betting boom that began near the end of the last decade, the prediction market landscape has seen a flood of new entrants. Notably, that hasn’t yet included any of DraftKings and FanDuel’s main rivals in the online sports betting industry. Keyword: yet.
So which existing U.S. sportsbook will be next to make the prediction market pivot? While there’s no firm answer right now, public comments from top executives and behind-the-scenes reports offer hints.
State-licensed operators face threats from regulators
Why there hasn’t yet been a rush for sportsbook operators to follow DraftKings and FanDuel’s lead into prediction markets likely comes down to threats from a handful of states with legal, regulated online sports betting markets. Some states have been embroiled in court battles with prediction platforms over their right to offer sports markets in their jurisdictions. The states argue they constitute unlawful and unlicensed sports betting, while the exchanges believe the federal regulatory oversight of the Commodity Futures Trading Commission (CFTC) supersedes state laws.
The warnings about sports prediction markets have suggested OSB companies’ existing licenses in the states (for offering sports betting, but also DFS and online casino products, if applicable) could be suspended if an operator attempts to offer sports event contract trading in those states.
But some of the threats also suggested that offering prediction markets in other states could lead to their licenses being reappraised. For example, the most recent state to issue a letter warning against offering prediction markets, Massachusetts, wrote in their notice that if another state takes action against the licensees for offering event contract trading, “such action may inform decisions related to your suitability in Massachusetts.”
FanDuel and DraftKings try to appease gaming regulators
In an effort to lessen the state regulatory blowback, FanDuel and DraftKings have said that their forthcoming sports prediction markets will only be made available in states without legalized sports betting. They’ve already voluntarily backed off of doing business in Nevada, which had warned stakeholders against offering any type of prediction markets in the state without a license from the gaming board.
Along with abandoning Nevada, FanDuel and DraftKings more recently said they were also leaving the American Gaming Association, a top gaming industry trade group that has been lobbying against federally-regulated prediction markets. FanDuel and DraftKings told InGame that they left because their prediction market moves don’t align with the AGA’s current priorities.
Other OSB operators will be cautiously watching DraftKings and FanDuel prediction market entries closely, focusing specifically on the regulatory blowback, to see if the tradeoff makes sense for them.
PENN: Prediction markets are ‘existential’ threat to OSB
Executives from three long-established gambling companies that operate top second-tier OSB platforms — MGM, Caesars and PENN Entertainment — have recently relayed their companies’ current stances on prediction markets. Their comments were all cautious, with indications that, while they were prepared to make the move, they were keeping a close eye on the regulatory and legal disputes and would await more clarity in those areas before taking the plunge.
During PENN Entertainment’s early-November Q3 earnings call, CEO Jay Snowden offered some of the harshest words about the rise of prediction markets. Along with its brick-and-mortar casinos and online casino business, PENN operates ESPN Bet, which will soon become theScore Bet after the dissolution of its partnership with ESPN.
Snowden said the company would take direction from state regulators and called prediction markets an “existential” threat to the industry. He said that instead of waiting to see how things play out in court, he believes operators need to join regulators in their pushback on sports event contracts, warning that, if unchecked, it’s only a matter of time before a federally-regulated platform figures out a way to offer a predictions-based iCasino product in all 50 states.
“I think as an industry, we’ve got to play offense and figure out, how do we stay ahead of this?” Snowden said. “And we’ve got to come together quickly, though. We don’t have a lot of time here, and I think there’s some natural opportunities and some natural potential solutions here.”
MGM, Caesars reluctant to commit to prediction markets
Bill Hornbuckle, CEO of MGM Resorts International, which owns and operates the BetMGM Sportsbook, made toned-down but similar remarks about prediction markets at the Bank of America Gaming, Lodging & Leisure Conference in September. He said that while the company will be prepared to enter the space with more legal clarity, federally-regulated prediction markets are “not something that we endorse.” His comments were echoed by BetMGM CEO Adam Greenblatt during a Q3 earnings call.
“MGM Resorts’ view is that prediction markets invite the federal government into a space it’s never been and it’s not a place we’d like to see this marketplace go,” Hornbuckle said. “Full stop.”
Officials from Caesars Entertainment, which operates a chain of casinos as well as Caesars Sportsbook and an iCasino product, have similarly seemed to slam the door on an imminent prediction market entry. Caesars CEO Tom Reeg said during a recent earnings call that they will heed the warnings against prediction markets from state regulators.
“We will not put any of our licenses at risk,” Reeg told analysts on the call. “We believe what’s happening in prediction markets is sports gambling. If a path develops where we can participate in a way that doesn’t put licenses at risk, we are prepared to go down that path.”
Other OSB operators either mum or skeptical
Other casino companies with digital offshoots have made similar comments, if they’ve commented about prediction markets at all. Despite operating the Bally Bet sportsbook in nearly a dozen states, Bally’s Corporation officials, for example, have made no public statements about prediction markets. Outside of a stray cautious comment at a gaming conference in April, neither has Hard Rock, which is privately owned by the Seminole Tribe of Florida and operates the online Hard Rock Bet sportsbook and casino in select U.S. states.
CEO Richard Schwartz of Rush Street Interactive, which operates the BetRivers sportsbook and iCasino brands, said his company had less competitive risk from prediction exchanges than “sportsbook heavy” operators, because they are more focused on online casino growth. He said Rush Street will wait for a clearer regulatory picture before addressing prediction markets.
Delaware North, which operates some regional casinos and the Betly sportsbook and online casino brand in a limited number of states, doesn’t seem keen on prediction markets at this point, either. In a September interview with EGR North America, the company’s Chief Interactive Gaming Officer, Lee Terfloth, called prediction markets an “absolutely fundamental threat to sports betting” in the regulated U.S. gaming industry.
Fanatics reportedly eyeing predictions partnership
If there was a prediction market for which sportsbook-affiliated company would be next to get into the event contract trading business, Fanatics would likely have the best odds.
Last week, Financial Times reported that Fanatics was in early discussions to offer prediction markets via Crypto.com, which has recently announced a flurry of technical service provider partnerships with the likes of Truth Social, Hollywood.com, and sweepstakes casino MyPrize.
The CFTC-registered Crypto.com Derivatives North America also powers the prediction markets recently made available in select states on the Underdog platform. Although primarily known as a fantasy sports operator, Underdog also has standard sports betting licenses for its sportsbook product in a few states, which technically makes it the first licensed U.S. sportsbook to get into prediction markets.
Fanatics, the world’s largest licensed sports merchandise retailer, has had a lot of success since entering the sports betting market in 2023, with its sportsbook ranking third in market share behind FanDuel and DraftKings in some states. Earlier this year, Fanatics launched its online casino app, which is now available in four states, an indication that the company is primed to continue expanding its digital footprint.
Fanatics would have to walk the same regulatory tightrope that DraftKings and FanDuel are balancing on, so if it did partner for prediction markets, it would likely also limit access (particularly to sports markets) to states without legalized sports betting.
Other potential prediction market contenders
Of course, the next sportsbook to go the prediction market route could be an unexpected darkhorse. For example, while officials from the U.K.-based bet365 haven’t publicly spoken about prediction markets, they could be a way for the company to supercharge its successful expansion in the U.S.
Though not a traditional sportsbook, Sporttrade is licensed to offer sports betting in five states. As a sports betting exchange, Sporttrade is already set up like a peer-to-peer prediction market platform. After previously requesting special approval from the CFTC to go nationwide, the company has reportedly filed for Designated Contract Market status with the government agency. That’s the designation Kalshi and others have that allows them to operate nationwide and partner with other entities to facilitate prediction markets.
As platforms continue to see record-breaking engagement with sports event contracts, it seems inevitable that there will be more state-licensed sports betting platforms getting into the prediction market space. While most of the bigger sportsbooks will likely wait to see how the rollout of DraftKings and FanDuel’s prediction products goes, and others might wait for the resolution of state and tribal challenges to sports markets (which could take years), it wouldn’t be surprising to see a few test the waters sooner rather than later.
