Copyright The Boston Globe
DraftKings already runs one of the most popular online betting apps in the country. Now the Boston-based company is adding a prediction market, which could allow it to offer sports bets and other wagers even in states that have not legalized gambling. On Tuesday evening, DraftKings said it acquired New York-based Railbird Technologies, which runs a prediction market under license from the federal Commodity Futures Trading Commission. Prediction market operators argue that the CFTC’s federal regulations override state gambling bans, though multiple states including Massachusetts have gone to court to shut down the wagering. DraftKings said it planned to offer a mobile prediction market betting app in a few months for wagering on events across finance, culture, and entertainment, with the potential to “expand into additional categories over time.” Advertisement In a prediction market, the odds on any wager are set in the market in real time based on how many people are willing to take each side of the bet, similar to the way futures contracts on commodities from corn to pork bellies trade. Jason Robins, DraftKings’ chief executive and cofounder, has been saying for months that DraftKings was “actively exploring” the alternative format. And rival FanDuel has already partnered with with CME Group, formerly known as the Chicago Mercantile Exchange and one of the giants of futures contract trading. In a statement on Tuesday, Robins said the company was “excited about the additional opportunity that prediction markets could represent for our business.” Under the Trump administration, the CFTC has allowed prediction markets to offer sports bets despite federal law prohibiting futures contracts related to “gaming.” Massachusetts Attorney General Andrea Joy Campbell filed a lawsuit last month against prediction market Kalshi, which allows players as young as 18 despite state law prohibiting people under 21 from betting. Advertisement Prediction markets also don’t pay state taxes imposed on betting, sidestepping a levy that has brought in $200 million of revenue for Massachusetts from DraftKings and other traditional betting apps over the past year. With huge brand recognition and its existing betting technology, DraftKings should be able to “not only compete but succeed in the prediction markets ecosystem,” analyst Robert Fishman at MoffettNathanson wrote in a report on the Railbird acquisition. DraftKings will likely add sports wagers to its prediction market, Fishman wrote, a move which would pressure states where gambling is illegal to “potentially accelerate the timeline for legalizing true online sports betting.” Shares of DraftKings, which had lost 10 percent so far this year because of fears of competition from prediction markets, gained 2 percent in mid-morning trading on Wednesday. Aaron Pressman can be reached at aaron.pressman@globe.com. Follow him @ampressman.
