The ongoing legal fight regarding prediction markets and their ability to operate on a state-by-state basis is being closely monitored by DraftKings and other online sportsbooks.
While the DFS and sports betting conglomerate has a solid hedge via DraftKings Predictions, the company is secretly hoping prediction market court rulings in their favor can allow their stock to bounce-back in a big way.
Prediction Markets Are Threatening Traditional Sportsbooks
It’s no secret by now that prediction markets like Kalshi and Polymarket are officially cutting into the bottom line of online betting sites. Huge companies such as DraftKings and FanDuel haven’t wanted to admit it, but they (along with their shareholders) are starting to feel the heat.
With more prediction market platforms popping up and establishing solid ground in a growing industry, DraftKings is eyeing forthcoming court decisions as a way for its stock to rebound.
The surge of prediction markets has created a notable ding in DraftKings’ stock, with the site hovering well below its 52-week high after recently showing signs of recovery.
Despite DraftKings CEO Jason Robins suggesting that there is no “discernible” impact on their sportsbook revenue, the numbers tell a different story. DraftKings has undeniably suffered, with their stocks down 45% over the past year, while FanDuel (65.5%) has had it even worse.
Why Prediction Market Court Cases Matter
Kalshi has been at the forefront of the prediction market legal battle, and they recently bowed out of their showdown with Washington. More U.S. states are challenging the platform’s federally regulated status, suggesting their “event contracts” are nothing more than sports wagers.
The debate largely resides in the sports contract arena, but there is an obvious amount of subjectivity for the courts to circumvent. The biggest problem? The federal government has already given prediction markets a free pass, and their tie-in with the CFTC.
Kalshi and other prediction market sites have the upper hand at the moment, and outright bans across the board seem unlikely. However, any number of U.S. states restricting prediction sites would be good for the bottom line of DraftKings and other sportsbooks.
DraftKings Has a Hedge in Their Back Pocket
No matter what happens, DraftKings is probably going to come out of this okay. They’re experiencing a significant dip based on where they were, but the creation of DraftKings Predictions sets them up to combat the rise of other prediction market platforms.
Should prediction markets start winning these state-by-state showdowns, the prediction market industry will only get busier and louder. The existence of this built-in hedge guarantees DraftKings at the very worst has their foot in the door.
The Trade Handle Prediction Markets Take
DraftKings definitely wants their sportsbook model to be the big winner at the end of the day, but the more likely scenario is somewhere in the middle.
The fact that Kalshi was already forced to pull out of Washington tells you that it’s pretty likely they run into more resistance. As we have seen with sports betting sites, their model being approved on a federal level doesn’t equate to free entry into certain states.
Before long, more states will close the door on prediction market platforms, even if the future is cloudy as a whole. DraftKings has at least positioned itself nicely in the middle, however, as they will clearly benefit from states saying “no” to prediction markets, but the existence of DraftKings Predictions keeps them in the race regardless of where the debate goes.