- DraftKings’ prediction market foray may differ from FanDuel’s, says analyst
- It is also costlier, however that might enable DraftKings to reap extra rewards
Following information that Flutter Leisure’s (NYSE: FLUT) FanDuel is partnering with CME Group (NASDAQ: CME) to deliver monetary occasion contracts to the sportsbook’s prospects, sports activities betting trade observers are pondering how DraftKings — FanDuel’s nearest rival — will reply.
DraftKings’ potential prediction markets entry may differ from FanDuel’s, says an analyst. (Picture: Shutterstock/DraftKings/On line casino.org)
In a brand new report back to purchasers, Jefferies analyst David Katz addresses that difficulty, floating some concepts whereas noting that DraftKings’ response may differ from FanDuel’s transfer. He mentioned that like its competitor, DraftKings is prone to proceed “strategically” in relation to prediction markets.
As Katz observes, US prediction market operators should have designated contract market (DCM) and futures fee service provider (FCM) permits, that are issued by the Shopper Federal Commerce Fee (CFTC). FanDuel prevented the necessity to purchase an organization with these permits or ready out a doubtlessly prolonged regulatory course of as a result of CME already has these approvals.
“Our trade sources observe that FLUT’s partnership with the CME Group seems to be properly thought out, with the corporate avoiding the necessity to purchase a expensive DCM, benefiting from the stable popularity of the CME Group, avoiding the authorized conflicts of Kalshi, and doesn’t but doubtlessly provoke state gaming regulators with a transfer into sports activities contracts,” notes Katz.
DraftKings Might Go a Completely different Route
It’s attainable that DraftKings employs a prediction markets strategy that differs from that of FanDuel. For instance, the previous has filings with the Nationwide Futures Affiliation (NFA), indicating it may pursue DCM and FCM permits by itself – a transfer that has professionals and cons.
We observe that DKNG doubtlessly buying DCM and FCM licenses can be a costlier route than FLUT has undergone, although it additionally would enable DKNG to maintain extra of the economics of platform,” mentioned Katz.
DraftKings may additionally contemplate an acquisition to pave its manner into prediction markets. Final month, studies surfaced indicating the sports activities betting big was in talks with privately held prediction markets agency Railbird, which is a DCM license holder. Nothing has come of these talks as of but.
DraftKings has a knack for utilizing acquisitions to enter new arenas or solidifying market positioning, as highlighted by the purchases of Jackpocket and Simplebet.
Prediction Markets are Necessary, however …
With Kalshi, Polymarket, and Robinhood, amongst others, leveraging soccer season to deliver extra sports activities occasion contracts to purchasers, conventional sportsbook operators could also be pressured to get into the prediction markets sport. Katz says it’s a compelling house, however not one which alters the general funding thesis for firms corresponding to DraftKings and Flutter.
These operators additionally want to think about prediction market dangers. Specifically, the scrutiny they may invite by working in states against gaming growth or these the place tribal operators run the present.
“Regardless of the potential attract of prediction markets, we’ve reservations in regards to the sub-market for now, given the potential to influence relations with each current authorized state regulators, and potential new state alternatives, most notably California tribes and Texas political our bodies,” concludes Katz. “Our impression is that DKNG would equally train warning in any potential endeavors round predictions.”
