DraftKings acquires CFTC-compliant exchange Railbird, making a strong entry into the federally regulated prediction market

According to Zhitong Finance APP, DraftKings (DKNG.US) announced that it has acquired a federally regulated trading venue—Railbird Technologies Inc., an exchange authorized by the Commodity Futures Trading Commission (CFTC). This move is seen as its most aggressive step yet into the controversial and competitive field of prediction markets, aiming to expand its business beyond sports betting and capitalize on future demand for real-money betting on events. The terms of the deal have not been disclosed. Through this acquisition, DraftKings is expected to become one of the first sports betting companies to offer federally approved event contracts; meanwhile, financial license holders such as CME Group and Intercontinental Exchange are planning to enter the gambling fringe market through licensing, escalating the regulatory "arms race" between financial exchanges and gambling regulators. DraftKings plans to launch "DraftKings Predictions" on its mobile app, allowing users to trade "yes/no" outcome contracts related to finance, culture, and entertainment. The company's CEO and co-founder Jason Robins stated, "We are excited about the additional opportunities that prediction markets bring to our business." However, a DraftKings spokesperson indicated that it has not yet decided whether to offer contracts related to sports events. Reports suggest that this cautious stance reflects potential regulatory resistance—state gambling regulators have signaled that they will not allow the sportsbooks they oversee to simultaneously offer federally regulated event contracts. Railbird was founded in 2021 by two former analysts from Point72 and was selected for the Y Combinator accelerator; it just received CFTC "designated contract market" status in June of this year. This acquisition injects new momentum into its development. After announcing the acquisition of Railbird, DraftKings' stock price rose by as much as 8.3% in after-hours trading; however, last week, reports surfaced that CME Group plans to enter the sports betting market, which negatively impacted DraftKings' stock price. CME had previously announced a partnership with FanDuel to launch financial event contracts. Currently, emerging platforms like Kalshi and Polymarket have faced criticism from state regulators for operating in jurisdictions that prohibit sports-related betting by utilizing federal licenses. Last week, these platforms set record betting volumes, partly driven by bets on sports event outcomes. Citizens stock analyst Jordan Bender noted that the acquisition of Railbird will help DraftKings fend off competitors and potentially double its market size by operating in states like California and Texas, where traditional sports betting is prohibited. Bender emphasized in his report, "Previously, prediction markets put significant pressure on the stock, but the unknown factors have now transformed into an offensive strategy, and this strategic announcement should ease investor concerns." In recent months, sportsbook stock prices have been under pressure as prediction markets have become a threat to their business model. For sportsbooks facing recent stock price pressure, this acquisition represents a strategic shift At the same time, this acquisition comes at a time when the boundaries between Wall Street and the gambling industry are becoming increasingly blurred. It is important to note that any measures to increase sports event contracts may face resistance from state gambling regulators—who have indicated that they will not allow regulated gambling companies to simultaneously offer federally regulated event contracts