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DraftKings (NASDAQ: DKNG) announced today that it is purchasing Railbird Technologies, the parent company of prediction markets provider Railbird Exchange, putting an end to months of speculation. Additionally, the sportsbook operator announced that DraftKings Predictions will be introduced in the upcoming months.
The financial details of the Railbird sale, which had been rumored since July, were not made public. The news seems to have thrilled investors. are up by about 5% during Tuesday's after-hours trade after plunging during the previous month on 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.
For Railbird, there is thought to have been no bidding war. Because the acquirer usually constructs agreements of this type with limited upfront expenses and earn-outs over multi-year periods if certain financial objectives are fulfilled, Jordan Bender, an analyst at Citizens Equity Research, said the acquisition carries little risk for DraftKings.
Details of the 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.
In other words, DraftKings made no mention of the availability of sports event contracts on its platform. 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.
According to Bender, DraftKings may utilize the introduction of its prediction markets service to penetrate places like Delaware where sports betting is now illegal or where it is permitted.
“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' prediction market "will have the flexibility to connect to multiple exchanges," according to the news release. That may indicate that CME Group (NASDAQ: CME) will be participating, according to Bender, at least until Railbird technology is prepared to be merged with the next DraftKings app.
By the end of the year, the owner of the Chicago Mercantile Exchange (CME) hopes to provide contracts for sporting events, according to allegations that surfaced last week.
That might be a "breadcrumb" pointing to DraftKings Predictions with contracts relating to sports, possibly as early as early 2026, according to Bender. That's not a leap, as DraftKings stated in the release that the platform "may expand into additional categories over time."
