The future of market-based sports “predictions” in the US looks uncertain, and DraftKings appears to be reversing course on what looked like a possible entry to that space. It had created a subsidiary called DraftKings Predict and applied for membership in the National Futures Association. However, as reported by Covers, Bloomberg, and other publications, that application is no longer active.
Just as sweepstakes casinos have been disrupting the US iGaming industry, companies like Kalshi, Robinhood and Crypto.com have been exploring a novel way of supplying a substitute for online sports betting, particularly in those states that haven’t yet legalized sportsbooks.
Whereas the sweeps casinos leverage federal sweepstakes law for their products, these sports trading markets use the concept of futures contracts to offer something that feels like sports betting but is technically a financial product. Kalshi, in particular, first began attracting attention in the US last year by offering election betting under the same model.
The original idea of futures contracts is that investors can hedge against world events that would hurt their other holdings by buying contracts that pay out if the proposition comes to pass. For instance, contracts might be traded on rainfall or crop yields in the agricultural sector or—relevantly, these days—on whether a given country does or does not impose new import tariffs.
Legal battle in progress over sports contract trading
The Commodity & Futures Trading Commission (CFTC) prohibits contract trading on “gaming” outcomes, but its current rules are vague on what that term entails. It proposed new rules last year that would have explicitly placed elections and sporting events in that forbidden category but hasn’t yet implemented them. Several states, including New Jersey and Michigan, have sent out cease-and-desist letters regarding the sports contracts. However, Kalshi is fighting those in court and has found early success, winning a preliminary injunction in Nevada.
Although it currently looks as if sports contract trading may remain legal until such time as the CFTC chooses to prohibit it, the controversy may have been enough to give DraftKings cold feet. Unlike Kalshi and its ilk, DraftKings is a regulated real-money gambling operator and has an interest in maintaining a good relationship with gaming regulators.
Willingness to innovate has been a key to DraftKings’ success since branching out from its origins as a daily fantasy sports (DFS) company. Although its brand appeals primarily to sports bettors, it has established itself as a top-three online casino brand thanks in large part to its extensive catalog of in-house exclusive content.
At the same time, the company has shown a tendency to explore—but not always fall through on—cutting-edge ideas for which the regulatory picture isn’t entirely clear. That is, after all, where DFS was when DraftKings and its rival FanDuel pioneered that space.
Last year, DraftKings shut down its ReignMakers digital trading card game and associated NFT Marketplace. That move came against the backdrop of a lawsuit alleging that the Reignmakers NFTs amounted to unregistered securities.
There was also, at one point, speculation that DraftKings would follow companies like PrizePicks into the “props-style fantasy” space. That was based on a trademark application it had filed for the name “Cashpicks.” Ultimately, though, it never made use of that trademark, and the regulated sports betting industry has argued against the legality of player-versus-house fantasy products.
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