FanDuel and DraftKings Expand into Prediction Markets Amid Regulatory and Market Pressures
In 2025, FanDuel and DraftKings launched their own prediction markets, joining competition that includes newcomer PrizePicks. DraftKings further expanded by acquiring Railbird, with plans for DraftKings Predictions to debut in states without legal sports betting, initially covering finance, culture, and entertainment contracts, and potentially sports contracts later.
Weekly prediction-market volume has exceeded $2 billion across platforms like Polymarket, Kalshi, Myriad, and Limitless. Certuity projects the market could reach $95.5 billion by 2035, growing at a compound annual growth rate (CAGR) of 46.8%.
However, the rise of prediction markets has led to regulatory challenges. State regulators are contesting federal oversight and pushing for state licensing, creating potential legal conflicts that could escalate to the Supreme Court. The Nevada Gaming Commission has criticized FanDuel over regulatory conflicts amid a broader sports gambling scandal involving FBI arrests.
Bank of America downgraded both DraftKings and Flutter (FanDuel’s parent company) due to concerns about declining margins, possible new taxes, and increasing competition from prediction markets. The target price for DraftKings (DKNG) was lowered to $35 from $40, and Flutter’s target was reduced to $250 from $325.
FanDuel secured a distribution deal with CME Group to offer event contracts. Notably, CME’s S&P 500 event contract saw 1,548 trades in October, marking a 41% year-over-year increase. Overall, CME daily contracts averaged 26.3 million during October.
Regulators have warned that offering prediction markets could jeopardize existing gaming licenses. Market leaders Kalshi and Polymarket are seen as frontrunners, and there is a risk that established incumbents might lose market share if they delay entering the prediction market space.
