FanDuel and DraftKings Expand into Booming Prediction Markets Amid Regulatory and Market Challenges
In 2025, major sports betting companies FanDuel and DraftKings launched their own prediction markets, with PrizePicks also entering the space. Weekly prediction-market volume recently topped $2 billion, and the market is projected to reach $95.5 billion by 2035, growing at a compound annual growth rate of 46.8%.
Despite growth opportunities, US regulators are grappling with state licensing issues for prediction markets, creating tensions between state authorities and federal Commodity Futures Trading Commission (CFTC) oversight. These regulatory challenges could lead to potential Supreme Court implications. Additionally, the Nevada Gaming Commission scrutinized FanDuel in October 2025 amid a broader sports-betting scandal context, raising concerns about possible conflicts between regulators and shareholders.
Financially, Bank of America downgraded DraftKings and Flutter (FanDuel’s parent company) due to declining margins, potential new taxes, and increasing competition from prediction markets, setting target share prices of $35 for DraftKings and $250 for Flutter.
FanDuel formed a partnership with CME Group in August 2025 to offer event contracts and co-market the products. CME's event contracts have primarily focused on economic indicators; for example, October saw 1,548 S&P 500 event-contract trades (+41% year-over-year), with year-to-date trades at 25,998. Overall, CME’s average daily contracts traded in October reached 26.3 million.
DraftKings recently acquired Railbird and plans to launch DraftKings Predictions in states without legal sports betting. The platform will initially cover finance, culture, and entertainment with potential expansion into sports contracts later.
Industry frontrunners include Kalshi and Polymarket, but incumbents face risks of cannibalizing existing products and may be slow to capture market share if regulators impose restrictions or if competition intensifies.
