FanDuel and DraftKings: Two Strategies for Prediction Products

From PASPA to Murphy: the legal context for prediction markets

In 1992, the Professional and Amateur Sports Protection Act (PASPA) made it illegal for almost all US states to “sponsor, operate, advertise, promote, license, or authorize” betting schemes on professional and amateur sports. The law was sold as a way to protect the integrity of sports and limit the spread of gambling harms, particularly to younger fans, but in practice, it froze legal markets in place: Nevada kept its full sports betting offer, a few states retained limited sports lotteries, and most demand shifted to offshore sites and local bookies.

That changed with the Supreme Court’s 2018 decision in Murphy v. NCAA, which struck PASPA down as unconstitutional under the Tenth Amendment’s anti‑commandeering doctrine. The ruling did not legalise sports betting nationwide; it handed the decision back to the states. Since then, more than 30 states and Washington, D.C. have authorised sports betting in some form, with legal handle approaching 150 billion dollars a year and sportsbook revenue around 14 billion dollars in 2024.
Despite this boom, three of the largest and richest markets—California, Texas and Florida—remain closed to licensed online sportsbooks, together accounting for close to a quarter of the US population.

The gap between demand and regulation has sustained a large unlicensed and offshore market, even as regulated operators and states have begun to capture significant revenue and tax.

The Opportunity: Three Megastates and a Federal Loophole

Before New York legalised mobile betting, thousands of residents routinely rode PATH trains or even biked across the Hudson just to cross the state line, place a bet on their phones in Hoboken or Fort Lee, and then head straight back home—a small but telling form of “gambling tourism” that showed how regulation, not technology, set the real boundary.

For sportsbook operators, the post‑Murphy map has a similarly obvious hole: billions in potential handle in California, Texas and Florida that cannot currently be accessed via state‑licensed mobile betting. At the same time, the Commodity Futures Trading Commission (CFTC) has opened a narrow but important path by allowing some “event contracts”—binary instruments that pay out based on whether a specified event occurs—on federally regulated exchanges.

As long as contracts avoid certain prohibited areas (terrorism, assassination and some forms of gaming), platforms like Kalshi can, in principle, offer trading to users in all 50 states under federal derivatives rules rather than state gambling law. This is the hinge on which the prediction‑market opportunity turns: if sports and real‑world events can be structured as CFTC‑compliant event contracts, operators gain a way to reach users in “dry” states without waiting for new gambling statutes.

Several analysts now view prediction markets as a potential five‑fold growth story, with revenues potentially reaching around 10 billion dollars globally by 2030 and annual trading volume heading toward one trillion dollars if both retail users and institutions embrace the products. Even the more bullish notes, however, stress that today’s prediction‑market revenues are still small versus US sportsbooks alone, and that regulation could change direction quickly.

Two leaders, one new vertical: FanDuel and DraftKings

FanDuel and DraftKings dominate US online sports betting, and both are deeply entangled with media. FanDuel, majority‑owned by Flutter Entertainment, is the largest US sportsbook brand and operates FanDuel TV and the streaming service FanDuel TV+, providing direct access to sports programming.
DraftKings, while independent, has long‑running partnerships with ESPN, Turner, and other broadcasters, embedding odds, sponsorships, and branded segments into mainstream coverage.

Their core business is still sports betting. FanDuel holds roughly 40–41% of US online sportsbook revenue, DraftKings about a third, and both are focused on increasing volume, improving margins and expanding into online casino where permitted.

Prediction‑style products sit on top of this base: interesting, potentially strategic, but not yet central to quarterly earnings.
What makes the current moment notable is that both companies have now launched CFTC‑aligned prediction platforms—FanDuel Predicts and DraftKings Predictions—yet they are pursuing very different strategies.

FanDuel signage in New York highlights the Flutter‑owned brand’s dominant US sportsbook position and provides visual context for its cautious entry into CFTC‑regulated prediction markets via FanDuel Predicts. Editorial image © Richard Levine / Alamy

Strategy one: FanDuel’s narrow, compliance‑first rollout

Founded in 2009 as a daily fantasy sports startup, FanDuel has spent the past decade evolving into Flutter Entertainment’s flagship US brand, combining sportsbook, iGaming and fantasy under a single umbrella. As part of a global betting group with long experience in bookmaking and regulation, FanDuel has generally prioritised protecting its dominant US sportsbook position and tightly integrating new products such as FanDuel Predicts into a broader risk, compliance and media strategy.

FanDuel Predicts is a FanDuel‑branded platform that uses CME Group’s exchange infrastructure to list and clear its event contracts, rather than operating as a standalone exchange in its own right. The product launched in late 2025 in just five states—Alabama, Alaska, North Dakota, South Carolina and South Dakota—and offers yes/no contracts priced between 0.01 and 0.99 dollars on financial benchmarks (such as the S&P 500 and Nasdaq‑100), economic indicators (GDP, CPI), commodities, crypto and selected sports events, with each contract settling at zero or 1 dollar depending on whether the event occurs.

FanDuel’s own messaging underscores how cautiously it is proceeding. “We’re giving our customers a new platform to engage with the world around them—whether that’s the next Fed rate decision or a sports event,” said James Cooper, Senior Vice President, Flywheel and New Ventures, describing the five‑state launch as a way to test engagement and “refine our approach as we expand to additional states in 2026.” CME Group’s president and CFO Lynne Fitzpatrick called the launch “a pivotal step for expanding the reach of our products to FanDuel’s millions of registered users across the U.S.”

Structurally, FanDuel is drawing hard lines. Sports contracts are offered only in states that do not permit FanDuel’s online sportsbook and are designed to be withdrawn once a state legalises sports betting, minimising the risk that regulators view Predicts as an attempt to route around existing gambling law. The company also emphasises consumer‑protection features—deposit limits, alerts, self‑exclusion and access to Kindbridge Behavioural Health—mirroring its responsible‑gambling framework in the core business.

Several Wall Street analysts describe FanDuel’s prediction‑markets push as a defensive, option‑like move: buying a seat at the table, learning about customer demand and regulatory limits, but keeping the initiative small enough that it does not jeopardise its dominant sportsbook position or key licences.

DraftKings’ Times Square Nasdaq celebration reflects the operator’s push to position itself as a high‑growth, tech‑driven betting company expanding into new verticals like event trading. Editorial image © Richard Levine / Alamy

Strategy two: DraftKings’ broad, growth‑first push

Founded in 2012 as a daily fantasy sports startup, DraftKings has spent the past decade transforming itself into a publicly traded, multi‑product betting and iGaming platform. Chief executive Jason Robins has said he has “ambitions to one day be like an Amazon,” using a tech‑first stack to layer new products on top of the core sportsbook rather than staying a single‑line bookmaker.

DraftKings has gone wider, with its Predictions app already live in 38 states, including Washington, D.C., and California and Texas, two of the most coveted major markets that still do not allow licensed mobile sportsbooks. In jurisdictions where DraftKings runs a regulated sportsbook, Predictions typically limits itself to non‑sports contracts; in others, it offers a mix of sports and non‑sports events structured as CFTC‑compatible contracts.

DraftKings CEO Jason Robins has described Predictions as both a foothold in new states and a hedge alongside the core sportsbook. In recent interviews, he has said that prediction‑market economics are not yet as attractive as traditional sportsbooks, but that the product gives DraftKings a way to start building in places like California and Texas and to experiment with formats that can evolve over time.

Behind this sits DraftKings’ broader ambition to be seen as a tech‑led consumer company rather than a pure bookmaker. Robins has compared his aspirations to large platforms such as Amazon, layering multiple products on a common data and product stack, even as critics point out that the company still spends heavily on marketing and remains heavily dependent on sports betting and iGaming for revenue.

DraftKings’ sales and marketing expenses rose to about 1.26 billion dollars in 2024, more than double the 2021 figure, as it expanded into new states and pushed harder on acquisition.
Equity research on the Predictions launch is mixed. Some analysts argue that DraftKings is right to take the initiative, seeing event contracts as a logical adjacency that could meaningfully add to revenue if the regulatory picture stabilises and user adoption grows. Others are more cautious, noting that prediction‑market revenues are still small, that regulatory risks are hard to price, and that additional product complexity could distract from the core sportsbook, which remains the main driver of valuation.

A fork in the vertical—and what comes next

FanDuel and DraftKings are therefore taking opposite positions within the same new vertical. FanDuel, as a clear market leader, is using a slow, tightly controlled launch to learn and signal compliance, protecting its dominant sportsbook franchise and media‑distribution ecosystem while maintaining an option for future growth in prediction markets.
DraftKings is taking a broader, more experimental stance, using Predictions to reach “dry” megastates, serve different customer segments, and position itself as a platform that straddles betting and trading, even at the cost of greater complexity and near‑term uncertainty.


Both approaches rest on unsettled foundations. Cases such as Arizona’s move against Underdog show that states are prepared to push back if they feel prediction products undermine their gambling frameworks, and the American Gaming Association and some lawmakers are pressing to have sports event contracts treated as gambling, not finance. At the same time, CFTC decisions on which events can be listed, particularly in sport and politics, will determine how much of the theoretical market can be reached under federal law.
For now, it is impossible to predict exactly how this vertical will settle. Regulatory decisions, enforcement priorities and customer behaviour could tilt the field toward slow, tightly controlled products like FanDuel’s, more aggressive plays like DraftKings’, or something closer to today’s specialist exchanges.

What is clear is that prediction‑style products are no longer a niche experiment, and their evolution will say a great deal about where the line between betting and trading is ultimately drawn.


This article has focused on the structural opportunity and the divergent strategies of FanDuel and DraftKings. The next piece will turn to the other side of the equation: the legal and consumer‑protection risks, the role of players like Kalshi and Polymarket, and how quickly regulation or enforcement could redraw the line between trading and betting—for better or worse.

Further Reading & Key Sources