DraftKings and FanDuel Enter Prediction Markets Amid Regulatory and Competitive Challenges
DraftKings and FanDuel launched their own prediction markets in 2025, joining other entrants such as PrizePicks. Weekly prediction-market volumes across platforms like Kalshi, Polymarket, Myriad, and Limitless have topped $2 billion. Certuity projects the market size could reach $95.5 billion by 2035, growing at a compound annual growth rate of 46.8%.
U.S. regulators are currently clashing over whether the Commodity Futures Trading Commission (CFTC) or individual states have licensing authority for prediction markets, a dispute that may escalate to the Supreme Court. In October, Nevada regulators scrutinized FanDuel amid concerns about cross-licensing, coinciding with an FBI sports-gambling scandal that increased regulatory attention.
Bank of America downgraded DraftKings and Flutter Entertainment, FanDuel's parent company, citing declining margins, the risk of new taxes, and tougher competition from prediction markets, resulting in cuts to their price targets. Meanwhile, Caesars Entertainment and MGM Resorts are monitoring prediction markets but have no immediate plans to enter due to license risks.
DraftKings is acquiring Railbird and plans to initially focus its DraftKings Predictions app on states without legalized sports betting, starting with finance, culture, and entertainment contracts and leaving the possibility for future sports contracts. FanDuel has partnered with CME Group to offer event contracts and expand distribution via its platform. Notably, CME's S&P 500 event contract traded 1,548 times in October, a 41% increase year over year, with 25,998 trades year-to-date and an average of 26.3 million contracts traded daily in October.
Analysts warn that incumbent operators may cannibalize existing products or delay market entry, which could allow existing platforms like Kalshi and Polymarket to capture additional market share if they act quickly.
