DraftKings on Tuesday announced the long-rumoured acquisition of Railbird Technologies, a move that positions the sportsbook operator for a highly anticipated prediction market launch in the coming months.
The acquisition supports DraftKings’ broader strategy to enter prediction markets, while expanding its addressable opportunity through regulated event contracts, the company noted in Tuesday’s statement. As part of the announcement, the company confirmed plans to launch DraftKings Predictions, an app that will enable customers to trade regulated event contracts on real-world outcomes in areas such as finance, entertainment and pop culture. Other product details, however, remain uncertain.
For instance, the announcement shed little insight on whether or when DraftKings will consider a potential addition of sports event contracts. The company did not address whether it will offer those contracts on a limited basis in states without legal sports wagering, nor did DraftKings answer if it will set limits for certain contracts, a critical question for high-worth customers who engage in price discovery.
The “offering may expand into additional categories over time, deepening customer engagement and extending DraftKings’ addressable audience”, the company wrote in the statement.
Railbird Exchange is a federally licensed exchange designated by the US Commodity Futures Trading Commission.
DraftKings playing 4-D chess with prediction market move?
Prior to Tuesday’s news release, Truist Securities analyst Barry Jonas issued an earnings preview for the third quarter of 2025. In the research note, Jonas wrote that the emergence of sports prediction markets “dominated the narrative” over the three-month period ending on 30 September. At this month’s Global Gaming Expo in Las Vegas, BetMGM and Caesars Entertainment noted that they would not pursue the launch of sports event contracts, he added.
But for FanDuel and DraftKings, the two market leaders in sports betting, there are other considerations at play when mulling the addition of the derivatives on sports. Unlike the two casino giants, the digital companies do not have a retail presence in Nevada, where the state is embroiled in litigation with Kalshi and recently issued warnings to sports betting licencees considering prediction markets.
A group of 36 states, led by Ohio Attorney General Dave Yost, filed an amicus brief over the summer urging an appellate court to side with New Jersey in a lawsuit against Kalshi. The prediction market is facing a wave of litigation on the legality of sports event contracts in states where sports betting is legal. It might explain why Flutter, the parent company of FanDuel, initially decided to focus on non-sports event contracts upon the rollout of a new prediction market.
Earlier this month, Flutter and DraftKings saw double-digit stock declines after Kalshi introduced a new same-game parlay product for sports events.
“The 4-D chess continues as digital operators continue to weigh the pros and any cons of offering predictive sports,” Jonas wrote in a 21 October note. “We remain buy-rated on both with recent share weakness likely overdone.”
Nation’s most populous states in play
Given the duo’s brand and technology leadership, Jonas still expects DraftKings and FanDuel to be long-term winners in the wider space. Jordan Bender, an analyst with Citizens JMP, told iGB Tuesday that product and technological innovations will likely be the “key ingredients” in the battle to win customers.
If the companies begin to offer sports event contracts, they will enter a crowded space with the likes of Kalshi, Robinhood and Crypto.com. One option for the operators could be to launch sports event contracts in the 11 states that have yet to legalise sports betting. Those include the two largest, California and Texas, which have more than 70 million residents combined.
“You’re essentially adding 50% of the population overnight,” Bender told iGB, referring to non-legal states.
Without mentioning any states by name, DraftKings CEO Jason Robins suggested last month that the total addressable market for sports derivatives in those jurisdictions could be “very significant”.
The rise of prediction markets has created a fierce turf war over regulations for sports derivative products. This spring, MGM Resorts CEO Bill Hornbuckle opined that the derivatives could be the “concrete” that enables the federal government to intervene in the gambling industry.
Stock moves following Railbird acquisition
Following the announcement, DraftKings surged 6% in Tuesday’s after-hours session to $36 a share. Before Tuesday’s news, DraftKings fell approximately 25% over the prior 30 days due primarily to prediction market concerns. Jonas reiterated a $50 price target and a “buy” rating on DraftKings.
Chris Krafcik, managing director of Eilers & Krejcik, wrote on LinkedIn that the acquisition of Railbird buys the company and its stock a bit of “breathing room” amid a punishing, narrative-driven hype cycle.
Sullivan & Cromwell LLP served as legal counsel to DraftKings. Moelis & Company LLC served as financial advisor to Railbird. Miles Saffran, Railbird CEO, described the announcement as a “transformational moment” for the company. Proskauer Rose LLP and Kirkland & Ellis LLP served as legal counsel to Railbird.
The companies engaged in negotiations over the summer, according to Front Office Sports. Terms of the deal were not disclosed.
There remain questions about whether and when DraftKings will consider offering sports event contracts.