The Regulatory Flank
Sports betting giant DraftKings has bypassed state-level gridlock to launch DraftKings Predictions, a standalone app operating under federal oversight from the Commodity Futures Trading Commission (CFTC). By registering its subsidiary, GUS III Inc., as an Introducing Broker rather than a sportsbook, the company can now offer event contracts in 38 states, including California, Texas, and Florida, where mobile sports betting remains illegal or monopolized.
DKNG shares traded flat at $34.19 following the announcement, though the move signals a structural shift in how operators approach restricted jurisdictions.
The Mechanism: Routing, Not Bookmaking
Unlike its sportsbook, DraftKings Predictions does not act as the house. Instead, it functions as a frontend that routes user orders to regulated exchanges. At launch, the app connects exclusively to the CME Group, allowing users to trade contracts on sports and financial outcomes. The roadmap includes integrating Railbird Technologies, a CFTC-regulated exchange DraftKings acquired in October 2024. Owning the exchange layer (Railbird) would eventually allow DraftKings to capture the full fee stack, moving away from the lower-margin brokerage model.
DraftKings Predictions is a significant milestone… We will create an unparalleled customer experience, leveraging key strategic relationships like ESPN and NBCUniversal to provide an authentic, real-time product. — Corey Gottlieb, Chief Product Officer
Polymarket’s Corporate Rival
This launch places DraftKings in direct competition with Kalshi and the offshore crypto-native Polymarket. While Polymarket dominates volume via unregulated crypto rails ($40.9B in illicit crypto activity tracked by Chainalysis), DraftKings is betting on fiat on-ramps and federal compliance to capture the retail mainstream. The “prediction market” classification allows DraftKings to offer what are effectively binary sports bets (e.g., “Will the Chiefs win?”) under the guise of hedging instruments.
State-Level Friction
The rollout is not without risk. Regulators in states like Ohio and Maryland have previously issued cease-and-desist orders to prediction platforms like Kalshi, arguing that sports-linked contracts constitute unlicensed gambling. DraftKings is wagering that its CFTC Introducing Broker status preempts state gaming laws, a legal theory that has yet to be fully tested in federal court.
