DraftKings has revealed its plans to acquire Railbird Technologies Inc. along with its subsidiary Railbird Exchange, establishing its formal entry into the prediction markets arena. This acquisition grants the sports betting platform access to a Commodity Futures Trading Commission (CFTC)-registered designated contract market (DCM), facilitating trading of event contracts centered around actual outcomes.
As part of this acquisition, DraftKings will roll out DraftKings Predictions, a state-of-the-art mobile platform enabling users to trade event contracts not just limited to sports, but also spanning finance, culture, and entertainment sectors. According to the company, this product “is designed to integrate with multiple exchanges,” potentially incorporating contracts from other CFTC-approved platforms like Kalshi. The application is anticipated to launch within the next few months.
This confirmed acquisition paves the way for DraftKings to broaden its horizons beyond conventional sports betting. “We are enthusiastic about the possibilities that prediction markets can bring to our business,” stated Jason Robins, CEO and co-founder of DraftKings.
“We believe that Railbird’s skilled team and innovative platform, coupled with DraftKings’ extensive reach, reputable brand, and expertise in mobile-first solutions, put us in a strong position to thrive in this added market segment.”
Founded in 2021 by Edward Tian and Miles Saffran, Railbird successfully obtained its CFTC license in July, following a prolonged approval process that started in 2022. Backed by Y Combinator, the company is yet to introduce its own product, although it has crafted a proprietary system for regulated event markets. Railbird’s clearance services are under the purview of QC Clearing, owned by Polymarket.
“This moment is pivotal for our company, and we are excited to contribute to the future of DraftKings,” said Saffran, who serves as CEO of Railbird. “DraftKings’ leadership and industry presence create significant growth opportunities for our team and platform.”
Though the launch announcement did not encompass sports-related markets, DraftKings acknowledged that the scope of the product “could expand into further categories as time goes on.” This subtly implies potential inclusion of sports events in the future, despite the regulatory hurdles such a decision might entail.
Gaming regulators in various states, including Ohio, Arizona, and Michigan, have expressed that contracts for sports events might constitute unlicensed gambling. Some authorities have cautioned that sportsbook licensees could encounter disciplinary measures, such as license suspension or revocation, for participation in these markets. Ohio’s Casino Control Commission has also indicated that even forming partnerships with entities providing these contracts could invoke enforcement actions.
DraftKings first initiated its registration with the National Futures Association (NFA) in 2024, withdrew the application in March, and subsequently reapplied in June before finalizing this purchase.
During an August earnings call, Robins noted that DraftKings was in a “monitor mode,” keeping an eye on developments within the event contract sector before proceeding in that direction. Earlier this month, he remarked, “I just can’t envision a scenario” where customers would favor prediction markets over sportsbooks in states where both are allowed, though he recognized their potential in areas where sports betting remains illegal, such as in California and Texas.
This acquisition follows similar initiatives from competing firms. FanDuel recently revealed a collaboration with CME Group to establish a joint venture aimed at acquiring futures commission merchant (FCM) status, concentrating on short-term markets linked to commodities and financial indices. Additionally, Underdog Fantasy has unveiled a prediction market product via a partnership with Crypto.com, providing sports-oriented event contracts in states lacking legalized sports betting.
The financial terms of the Railbird acquisition remain undisclosed. DraftKings received guidance from Sullivan & Cromwell LLP for the transaction, while Moelis & Company served as the financial adviser for Railbird, which also had representation from Proskauer Rose LLP and Kirkland & Ellis LLP.
Following the announcement of the acquisition, DraftKings shares experienced a 7.1% increase in after-hours trading, reaching $36, and adding an estimated $1.2 billion to its market value, bringing the company’s valuation to about $18 billion. Nonetheless, despite this rise, DraftKings’ stock has still declined over 25% since late August, preceding the boost in football season that benefited rivals like Kalshi.