Prediction Products Hit California: FanDuel, DraftKings and the New Rules of Risk

The NFL has urged Congress to scrutinise sports‑related event contracts offered via prediction markets, warning that they are being sold in states where sports betting is not legal and outside state regulatory safeguards .Editorial image © Alamy/Ted Pink

Background: from “bets as commodities” to a workaround in “closed” states

In the second half of 2025, prediction products were still largely framed as a financial‑market twist on betting: contracts that turned bets into commodities and a “new animal” that forced U.S. sportsbooks to balance market‑style pricing against Vegas‑style regulation. Earlier iGaming Review articles have tracked that evolution in detail (see “When bets become commodities”, “A new animal” and “FanDuel and DraftKings: two strategies”), following the shift from niche finance product to a discrete vertical on operator roadmaps.

Those pieces ended with FanDuel and DraftKings sketching out two strategies —FanDuel cautious and adjunct, DraftKings more expansionary—but in a market that, while widely discussed, was still relatively small and politically ambiguous.

Estimates suggest global prediction‑market turnover rose from low‑single‑digit billions in 2024 to the tens of billions of dollars in 2025, driven by Polymarket, Kalshi and a handful of newer platforms, making the vertical visible in its own right rather than a niche curiosity.”

The NFL’s written evidence to the House Agriculture Committee illustrates the tone. “We are particularly troubled that several sports‑related futures contracts have been launched nationwide, including in jurisdictions where sports betting has not been legalized,” Jeff Miller, the league’s executive vice president, told lawmakers in December. “These contracts fall outside the purview of state regulatory authorities and the safeguards they impose upon the industry.” For industry readers, the question is less whether prediction markets matter and more which rulebook they are expected to follow.

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.

Lawmakers in Washington, D.C. are examining how prediction markets should be regulated, from insider‑trading safeguards to whether sports‑linked contracts belong under trading rules, gambling rules or both

A legal bridge into “closed” states

The current use case is straightforward. Prediction platforms are being used to reach customers in large U.S. states that remain closed to online sportsbooks, relying on the fact that event contracts sit under the Commodity Futures Trading Commission (CFTC) rather than state gaming commissions.

California voters rejected both tribal‑backed and commercial online sports‑betting initiatives in 2022, and no viable compromise has emerged since; most overviews still list online wagering as illegal in 2026, with no firm timetable for legalisation.

Yet by January 2026, Californians can download multiple prediction apps that allow them to stake money on sports outcomes and macro events, presented as trading rather than gambling. Legally, these products are generally treated as event‑based derivatives or “event contracts”, often approved or cleared via no‑action processes at federal level, with consumer‑protection obligations that resemble retail trading more than state‑licensed sports betting.
For operators, this mix creates both opportunity and risk. FanDuel and DraftKings can build brand presence in California long before a sportsbook licence is available, test trading‑style interfaces and cross‑sell financial and sports content.

But doing so in a state where tribes have long defended exclusive rights over gambling, and where leagues and lawmakers are watching closely, means the “we are a trading product” argument is now being actively examined rather than taken at face value.

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

January development 1: FanDuel’s national rollout, including California

FanDuel’s stand‑alone prediction app, developed in partnership with CME Group, has moved quickly from pilot to national footprint. After a limited launch at the end of 2025, FanDuel Predicts expanded to all 50 U.S. states by mid‑January 2026. The platform offers event‑based contracts across macroeconomic releases, equity indices, commodities and sports; sports contracts are currently available in around 18 states, including California, Texas and Florida.

Flutter’s leadership has described this as a way to offer a “trading‑style” product in markets where sports‑betting licences are unavailable or heavily constrained, emphasising that contracts clear on a regulated exchange and sit under federal supervision. In California, this means FanDuel now has a sports‑linked product live in a state where its sportsbook remains prohibited.

From a strategic standpoint, FanDuel is using prediction markets not as a replacement for sportsbooks but as a bridge into a high‑value jurisdiction that has not yet agreed to regulated online betting.

January development 2: DraftKings’ build‑out and new legal pressure

DraftKings has been building a prediction‑market vertical under “DraftKings Predictions” or similar branding since late 2025, positioning it as a way to reach customers in states where full sportsbook operations are not authorized. Analysts covering the stock have highlighted the potential for these products to add incremental handle in large states such as California and Texas without requiring new sports‑betting statutes, although they also note the legal uncertainties.

In parallel, DraftKings entered 2026 facing a multi-state class action alleging that its platform design and limit-setting practices violated gambling laws and consumer protection standards. The complaint does not target prediction markets specifically, but it underlines a broader constraint: any product released under a well‑known betting brand is likely to be evaluated by courts and regulators through a gambling lens, even if it is structured as trading.

For operators, the implication is that quasi‑financial products may broaden the addressable market but can also compound legal and compliance risk.

January development 3: regulators and leagues tighten the perimeter around sports‑linked prediction markets

January produced several signals that prediction‑market growth will be accompanied by closer oversight.

State enforcement at the perimeter:


In Massachusetts, the attorney general obtained an initial court order blocking Kalshi’s sports‑related event contracts on the grounds that they constituted unlicensed sports wagering. Kalshi later secured emergency relief to continue operating while the case proceeds, subject to stricter scrutiny. For any prediction product that closely resembles a traditional sports market, the episode illustrates how quickly state regulators can assert jurisdiction, even when a platform points to CFTC interaction.

League concern
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Major sports leagues have begun to raise concerns, with the NFL submitting written evidence to Congress about sports‑related event contracts offered via prediction markets.


Insider‑trading and national‑security scrutiny
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The “Maduro trade” has pushed a different set of concerns to the fore. According to reporting by NPR and others, an anonymous trader on Polymarket turned roughly $ 32,000 into more than $ 400,000 by buying contracts on the capture or exit of Venezuelan President Nicolás Maduro shortly before a U.S. operation became public. The episode has prompted calls in Congress for restrictions on government employees’ use of prediction markets and for clearer rules on insider trading in event contracts.

While the case relates to geopolitics rather than sport, it has sharpened questions about who trades on these markets, what information they use and how robust current safeguards are—issues that will also be applied to sports‑linked contracts.


Following the money: prediction markets vs regulated sportsbooks

International Banker, drawing on data from The Block and others, reports that aggregate prediction‑market volume reached around 37 billion dollars in 2025, with some estimates rounding closer to 40 billion dollars when smaller platforms are included. Other commentary suggests that, if recent trends continue, annualised volumes could move towards the 50‑billion‑dollar mark. By contrast, regulated U.S. sports‑betting handle is often estimated at 120–150 billion dollars a year, depending on how parlays and same‑game products are counted, with global regulated sports betting larger again.

The result is a market that is still smaller than mainstream sports betting but growing far faster and, crucially, able to reach very large states that remain closed to sportsbooks. For FanDuel and DraftKings, prediction products offer an additional layer of optionality: a way to engage customers and generate volume in otherwise inaccessible jurisdictions, while also experimenting with macro and financial event contracts that lie outside the traditional gambling repertoire.

For leagues, tribes and regulators, the same figures point to different priorities.

If tens of billions of dollars in event risk can be moved onto platforms that sit outside state gambling codes, concerns extend beyond individual consumer harm to market structure, tax treatment and the question of who ultimately “owns” the right to monetise sports and other real‑world events.

That is the context in which Jefferies analyst David Katz—whose detailed views will appear in a forthcoming iGaming Review interview—describes prediction products as a “difficult, narrow space” whose long‑term prospects depend less on technology than on politics, law and stakeholder power. His perspective is one informed reading of the landscape, rather than a prediction; the underlying facts suggest a market that is expanding, but into increasingly contested territory.

Beyond scale, tax treatment is becoming a competitive fault line.

A recent analysis in Forbes estimates that prediction markets handled more than 50 billion dollars in 2025 trading activity when sports‑linked markets and smaller platforms are included, and stresses that many of these wagers are currently treated as property transactions rather than gambling wins for U.S. tax purposes. That creates a potential tax advantage over sportsbooks, whose customers generally can only offset gambling losses against gambling wins, and helps explain why some states are seeking to reclassify sports‑related prediction contracts as gambling products that belong inside their own licensing and tax systems.

Further Reading