DraftKings is venturing beyond its core business of sports betting by introducing a new prediction market platform, eyeing the potential for future contracts linked to cryptocurrencies. The announcement, reported by Bloomberg, came on Friday with the launch of the DraftKings Predictions app, enabling users to trade on various sports and financial outcomes.
Initially, the app is accessible in 38 states, allowing sports-related trading in 17 of them. This strategic move is part of DraftKings” broader ambition to diversify its prediction market offerings, which will eventually encompass contracts associated with crypto, as well as entertainment and cultural events.
The foundation for DraftKings” expansion into prediction markets is its commitment to a regulated derivatives environment, aligning with standards akin to those set by the CME Group. Trading will be facilitated through the Railbird Exchange, a derivatives platform acquired by DraftKings and registered with the U.S. Commodity Futures Trading Commission (CFTC). This allows the company to operate event-based contracts under a robust regulatory framework.
As a publicly traded entity, DraftKings enhances the visibility of prediction markets and paves the way for crypto-linked contracts in the evolving landscape of regulated event trading in the United States. The company reported a third-quarter revenue of $1.14 billion, marking a 4% increase year-over-year, despite an adjusted loss of $127 million. DraftKings anticipates generating up to $6.1 billion in revenue for the current year, nearly tripling its earnings from 2022.
While DraftKings” new offering does not rely on blockchain or decentralized technologies, the prediction market sector has seen significant growth, largely driven by crypto-native platforms that have transformed its operation. Notably, Polymarket has emerged as a frontrunner, utilizing blockchain technology to facilitate global participation and rapid settlement of trades.
The surge in interest in prediction markets is also reflected in platforms like Kalshi, another U.S.-regulated prediction market operating under the CFTC. Additionally, crypto-centric financial infrastructure providers are entering this space, with Bitnomial Clearinghouse planning to support prediction markets tied to cryptocurrency and macroeconomic events.
Notably, major exchanges are also expanding their offerings to include prediction markets. Coinbase has announced plans to incorporate stock trading and prediction markets into its comprehensive service vision, while the Gemini cryptocurrency exchange, led by the Winklevoss twins, has rolled out prediction markets in the U.S. after securing necessary regulatory approvals.
As the market for prediction contracts continues to evolve, DraftKings” entry signifies a pivotal moment, with implications for both traditional and crypto markets as they converge.
