DraftKings Declares Prediction Markets Entry, Finally Buys Railbird

DraftKings (NASDAQ: DKNG) said today that it is purchasing Railbird Technologies, the parent company of prediction markets startup Railbird Exchange, ending months of rumors. Additionally, the sportsbook operator announced that DraftKings Predictions will be introduced in the upcoming months.

The Railbird deal's financial details, which were rumored in July, were not made public. The news seems to have thrilled investors. are up by about 5% during Tuesday's after-hours session after declining during the previous month due to reports of skyrocketing volumes on platforms like Kalshi.

"The acquisition supports DraftKings’ broader strategy to enter prediction markets, expanding its addressable opportunity through regulated event contracts. Railbird’s team and proprietary technology establish a strategic foundation for the Company’s future growth in this space, enabling advantaged economics and long-term product differentiation,” according to a statement issued by the Boston-based gaming company.

It is thought that Railbird was not the subject of a bidding war. According to Jordan Bender, an analyst at Citizens Equity Research, the acquisition carries little risk for DraftKings because the buyer usually organizes such transactions with low upfront expenses and earn-outs spread over several years, provided specific financial goals are fulfilled.

Details of DraftKings Predictions

As previously discussed, DraftKings announced intentions to launch a prediction markets platform of the same name in the coming months. "Customers will be able to trade regulated event contracts on real-world outcomes across finance, culture, and entertainment" through that smartphone application.

Stated differently, DraftKings made no mention of the availability of sports event contracts on that site. The operator didn't go into detail about why sports contracts weren't included, but it's clear why DraftKings doesn't want to pursue that path just yet because several state regulators have warned sportsbook operators that pursuing sports prediction markets could jeopardize their gaming licenses.

Bender points out that DraftKings might leverage the introduction of its prediction markets service to expand into areas where sports betting is currently prohibited or into places where it is currently not active, like Delaware.

“As a reminder, DraftKings has fantasy and Pick6 across 44 states, and will leverage its database and brand to cross-sell sports-minded customers to the prediction market platform at a more efficient rate compared to existing exchange Kalshi, in our view,” adds the analyst. “Said another way, the addressable market (in terms of U.S. population) for a ‘betting product’ doubled through this announcement.”

CME May Also Be Involved

DraftKings stated in the news release that their prediction market "will have the flexibility to connect to multiple exchanges." According to Bender, this may indicate that CME Group (NASDAQ: CME) will be participating, at least until Railbird technology is prepared for integration with the future DraftKings app.

The Chicago Mercantile Exchange (CME) owner reportedly plans to provide contracts for sporting events by the end of the year, according to allegations that circulated last week.

According to Bender, that might be a "breadcrumb" alluding to DraftKings Predictions that include contracts relating to sports as early as 2026. According to DraftKings' announcement, the platform "may expand into additional categories over time," so that's not a leap.