DraftKings mulls jumping onto the prediction market bandwagon

DraftKings may become the first traditional sportsbooks to go where several companies have already gone – prediction markets, with a particular focus on political races, such as the recently concluded US elections.

Prediction markets on elections have caused a stir in the United States, leading to billions being "wagered" on the outcome of the most recent race which saw Donald Trump reelected as the country’s 47th president.

Q3 results outline a future of prediction markets at DraftKings – maybe

During the company’s third-quarter results, CEO Jason Robins spoke about the possibility of introducing what he described as "trading event contracts." The wording is important, because regulated sportsbooks cannot simply offer markets on political races, as this would be illegal.

However, platforms such as Kalshi, ForecastEx, Polymarket, and recently Robinhood have all launched into the "prediction market" landscape, offering to back the outcome of election races, as November 5 showed. Polymarket and Kalshi became the most downloaded Apple Store apps in the Free Apps category as well.

This was made possible after a fiery legal head-to-head between Kalshi and the Commodity Futures Trading Commission which saw the latter argue against Kalshi’s prediction markets.

However, a court finally ruled in favor of the plaintiff, which was the prediction market in this case, effectively allowing it to roll out its markets in time for the US presidential election.

This has caused quite a stir, with DraftKings’ boss now eyeing the possibility of venturing into this market as well. During the Q3 earnings call, Robinson said: "I think it’s a very interesting thing. The dominant market within that is election markets, of course, and particularly during presidential elections. So, I know there’s a lot of attention on it over the last few weeks."

Robins though is careful about the implications of what this could mean, but he seems to be optimistic. "It’s a different framework," he explained, pointing out that prediction markets or contracts are licensed as a financial market, and not a betting product.

Navigating the legality of prediction markets is still murky waters

These contracts though are still a hard sell to the media and many regulators who continue to label anything that Kalshi puts forward as "betting." The company itself used the same catchphrase, putting "betting" right in its name in the App Store, which has stirred even more criticism.

On the one hand, Kalshi insists that it’s not a betting platform, but on the other, it uses the buzzword to drive traffic to its platform. However, the platform has been winning in court so far and with an incoming Donald Trump presidency, it could be given even more leeway.

"So, definitely something we’re looking at in advance of next presidential election and potentially there will be an opportunity to look at something sooner," Robinson mused in the meantime, arguing that prediction markets may indeed be coming to DraftKings – sooner than we think.

Image credit: DraftKings