DraftKings acquires Railbird, stirring changes in the prediction market, leveraging DCM licenses to penetrate "unregulated states" like California and Texas

Zhitong
2025.10.22 12:56
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DraftKings' acquisition of Railbird has sparked heated discussions in the sports betting field. Railbird has received approval from the CFTC to become a "Designated Contract Market (DCM)," allowing it to operate as a regulated futures exchange. DraftKings plans to launch the "DraftKings Predictions" mobile application, where users can trade event contracts in finance, culture, entertainment, and other areas. The market expects DraftKings to eventually enter the sports sector. Flutter Entertainment's FanDuel has also partnered with CME to launch prediction contracts. Analysts believe that customer acquisition in unregulated states and product development are the main drivers for online sports betting entering the prediction market

According to Zhitong Finance APP, the sports betting sector is buzzing about DraftKings (DKNG.US) acquiring Railbird. This transaction has garnered significant attention because Railbird received approval from the U.S. Commodity Futures Trading Commission (CFTC) earlier this year to become a "Designated Contract Market (DCM)." This license allows Railbird to operate in the U.S. as a regulated futures exchange, covering "event contracts" used by prediction market platforms such as Kalshi (KALSHI) and Polymarket (POLYMARKET).

As part of its new business strategy, DraftKings has also confirmed plans to launch a mobile application called "DraftKings Predictions." This app will allow users to trade regulated event contracts on real-world outcomes in finance, culture, entertainment, and other fields. Notably, the trading announcement did not mention the "sports" sector, but the market generally expects the company to eventually enter this category.

Just before DraftKings acquired Railbird, Flutter Entertainment (FLUT.US) announced that its subsidiary FanDuel would collaborate with the Chicago Mercantile Exchange Group (CME) to launch prediction contracts and event contract businesses in the U.S., initially focusing only on financial contracts.

CBRE analyst John DeCree updated his report, stating, "We believe that acquiring customers in unregulated states and product/technology development are the main business drivers for current online sports betting (OSB) operators to enter the prediction market."

He added, "If the legal definition of sports contracts is clarified, we believe both DraftKings and Flutter can quickly and efficiently enter this field." DeCree and his team believe that even if the legal definitions are not clarified, the prediction market will create "policy momentum" for states that have not yet opened online sports betting—these states may consider legalizing online sports betting to gain substantial tax revenue.

Needham analysts pointed out that the acquisition of Railbird is expected to boost DraftKings' currently sluggish market sentiment. Analyst Bernie McTernan stated that this transaction means DraftKings' potential market size (TAM) will expand, allowing entry into states that have not yet opened regulated online sports betting, such as California, Texas, and Florida.

Bank of America analyst Shun Kelly noted that DraftKings' announcement not only fills a strategic gap in its response to the "prediction market threat" but also reflects the company's urgency and awareness of the rapidly changing market landscape.

Other news in the prediction market sector includes the National Hockey League (NHL) signing agreements with Polymarket (POLYMARKET) and Kalshi (KALSHI), allowing these two companies to use its trademarks. Previously, the NHL had reached similar trademark collaborations with DraftKings, FanDuel (a subsidiary of Flutter), and BetMGM As of pre-market trading, DraftKings' stock price rose by 3.15%, while Flutter Entertainment (FLUT.US) saw a decline of 1.27%

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