DraftKings Buys Railbird for Prediction Market Entry

Railbird is a federally licensed exchange overseen by the Commodity Futures Trading Commission (CFTC). DraftKings purchased the company for its team and patented technology. The technology provides a strategic foundation for growth and product difference. Financial terms of the acquisition were not released.

Launching DraftKings Predictions Mobile App

Following the purchase, DraftKings plans to launch a new mobile application, DraftKings Predictions. The company expects the app to debut in the coming months. This product will let customers trade regulated event contracts on real-world outcomes. Markets will include finance, culture, and entertainment.

The app is designed with the ability to connect with multiple exchanges. This flexibility should allow DraftKings to offer a very wide range of markets to users.

The company has also suggested the offerings could expand to new categories later. DraftKings CEO Jason Robins called prediction markets an “additional opportunity” for the business.

Robins added that combining Railbird’s platform with DraftKings’ size and trusted brand “positions us to win in this incremental space.”

Regulatory Caution on Sports Contracts

The move into prediction markets comes with clear regulatory complexity, especially concerning sports. DraftKings notably did not include “sport” in its press release about the planned markets. This caution reflects the current state gaming regulations.

Prediction markets on sports outcomes are often highly controversial. Multiple states and regulators warn that companies could risk losing their existing gambling licenses if they offer sports-related contracts.

DraftKings currently operates legal sports betting in 28 U.S. states. The operator is avoiding conflict with state regulators who oversee its core business.

Analysts suggest DraftKings may explore offering sports prediction products only in states without licensed sports betting. These states could include California and Texas.

Market Context and Competition

DraftKings’ entry into this space is partly a response to rising market pressures. This move aims to expand the company’s potential customer base. It also acts as a defense against competition.

Rival operator FanDuel had already announced its own plan to enter the prediction market via a partnership with the CME Group. Furthermore, this purchase addresses a direct threat from Kalshi. Kalshi is a leader in prediction markets and a designated contract exchange.

The company has recently encroached on the sports betting industry. Kalshi’s September launch of a parlay-style product directly competes with high-revenue offerings from DraftKings. The acquisition of Railbird is a strategic answer to these market threats.

Miles Saffran, CEO of Railbird, called the deal a “transformational moment” for his company. He noted that DraftKings’ industry size and leadership create major opportunities for the Railbird team.