Published on: August 22, 2025, 12:03h.
Updated on: August 22, 2025, 12:03h.
- An analyst suggests DraftKings might take a different approach to prediction markets compared to FanDuel.
- This could entail higher costs, but it may enable DraftKings to gain greater benefits.
In light of Flutter Entertainment’s (NYSE: FLUT) recent collaboration with CME Group (NASDAQ: CME) to introduce financial event contracts for FanDuel users, sports betting experts are speculating on how DraftKings, a close competitor, will react.
In a recent client report, Jefferies analyst David Katz shared insights on this issue, suggesting that DraftKings might adopt a different strategy compared to FanDuel. According to Katz, DraftKings is expected to proceed “strategically” in the realm of prediction markets.
Katz highlights that U.S. operators in the prediction market domain require designated contract market (DCM) and futures commission merchant (FCM) licenses, which are granted by the CFTC. FanDuel bypassed the need to acquire a company with these licenses or endure a lengthy regulatory process since CME already possesses these approvals.
“Our industry sources indicate that FLUT’s partnership with CME Group is strategically sound, allowing the company to bypass the expensive DCM acquisition, benefit from CME Group’s esteemed reputation, avoid the legal challenges faced by Kalshi, and not risk attracting attention from state gaming regulators through a move into sports contracts,” notes Katz.
DraftKings May Explore Alternative Paths
DraftKings might consider an approach to prediction markets that varies from FanDuel’s. For instance, the company has submitted applications to the National Futures Association (NFA), showing interest in securing DCM and FCM licenses—though this path has its advantages and drawbacks.
“It is important to note that DKNG’s potential pursuit of DCM and FCM licenses would be a pricier route than what FLUT has undertaken, but it also allows DKNG to retain more of the economic benefits of the platform,” stated Katz.
Furthermore, DraftKings may look into acquisitions to facilitate its entry into prediction markets. Recently, discussions emerged regarding the sports betting giant negotiating with the privately held prediction market entity Railbird, which holds a DCM license. As of now, those discussions have not yet progressed.
Historically, DraftKings has effectively utilized acquisitions to penetrate new markets or solidify its standing, as demonstrated by its purchases of Jackpocket and Simplebet.
Prediction Markets Offer Promise, But Caution Is Key
With firms like Kalshi, Polymarket, and Robinhood capitalizing on the football season to deliver more sports event contracts, established sportsbook operators may find themselves compelled to join the prediction markets arena. Katz acknowledges this sector’s appeal, but it doesn’t fundamentally alter the investment outlook for companies like DraftKings and Flutter.
These operators must also weigh the risks associated with prediction markets, including the scrutiny they may face in states opposed to expanded gaming or those dominated by tribal operators.
“Despite the enticing nature of prediction markets, we hold reservations about this sub-market at the moment, considering the potential impact on relationships with existing regulatory bodies and the possibility of entering new state opportunities, particularly with California tribes and Texas political entities,” Katz concludes. “It is our impression that DKNG would also approach any future initiatives in prediction markets with caution.”