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DraftKings is acquiring predictions platform Railbird as it prepares to launch a mobile platform in the coming months to be called DraftKings Predictions.
Railbird is licensed by the Commodity Futures Trading Commission to offer an event contracts exchange. DraftKings targeted the company for its team and proprietary technology.
“We are excited about the additional opportunity that prediction markets could represent for our business,” DraftKings CEO Jason Robins said in a statement to CNBC. “We believe that Railbird’s team and platform—combined with DraftKings’ scale, trusted brand, and proven expertise in mobile-first products—positions us to win in this incremental space.”
Predictions markets allow customers to trade on the outcomes of various events in the worlds of finance, culture and entertainment, which will allow DraftKings to expand beyond its sports betting business. The markets on election outcomes and sports are the most controversial.
Dozens of states, their gaming regulators and tribes are suing or taking other actions to try to prohibit companies from offering trades based on sporting events, because they see it as unlicensed gambling.
Nevada is among the states warning that companies risk losing their gambling licenses if they offer sports in their prediction markets.
If DraftKings offers sports events contracts, it’s likely to focus only on states that don’t offer licensed sports betting, like California and Texas, to avoid running afoul of the states where it offers sports betting. Additionally, technology exists to prevent those sports trades from being available on tribal lands.
DraftKings also may offer more advanced “know your customer” guardrails, a term commonly used to reference identity verification, given its experience in the regulated gambling market.
