An organization linked to DraftKings (NASDAQ: DKNG) filed with the National Futures Association (NFA) for a venture named “DraftKings Predict,” indicating the sportsbook operator may eventually venture into the expanding prediction market sector. 

In 1981, the Commodities Futures Trading Commission (CFTC) designated the NFA as a “registered futures association,” and it began its regulatory activities the next year. The regulatory authority to which prediction market operators, including industry leader Kalshi, are accountable is the CFTC. NFA funding mainly comes from membership fees and charges from exchanges, rather than from taxpayer money. 

Under the Commodities Exchange Act (CEA), companies that create markets in the derivatives sector and provide those contracts to clients need to be registered with the CFTC. With some exceptions, the CFTC requires that member firms also register with the NFA. 

DraftKings Predict is presently recognized as a waiting member of the NFA. The submission was made by Gus II LLC and contained a DraftKings address and contact number. Co-founder and CEO Jason Robins was listed in the filing, and if DraftKings Predict is realized, co-founder Paul Liberman seems set to be its chief executive officer. 

DraftKings Might Have Observed Prediction Market Potential 

The NFA filing for DraftKings is dated July 30, 2024. That timing is arguably noteworthy for reasons beyond its occurrence several months prior to the US presidential election, an event that elevated prediction markets into the mainstream betting discussion. 

It also came several months ahead of financial services companies like Crypto.com and Robinhood entering the event contracts market. Some industry analysts saw Crypto.com’s launch of sports event contracts last December as a possible competitive risk to DraftKings and other sportsbook operators, with the company expanding its offerings the next month. Robinhood hinted at a comparable service before the Super Bowl but withdrew to adhere to a request from the CFTC. 

DraftKings probably recognizes that some of its users, particularly its primary audience of Gen Z and millennial males, are also customers of Crypto.com or Robinhood. These companies hold an edge that DraftKings and other gaming firms lack: they are federally regulated, allowing them to provide event contracts across all 50 states, while sports betting is active and lawful in only 38 states. 

It’s uncertain whether that privilege would apply to DraftKings and other gaming firms that may join the event contracts sector. 

Robins has talked about prediction markets in the past. 

The DraftKings Predict filing aligns with comments, including recent ones, from Robins that suggest the company is at least keeping an eye on the sector. He affirmed this earlier this month at the Morgan Stanley Technology, Media & Telecom Conference.

"I mean I think it’s definitely more on the opportunity side, but we have to see how this plays out. The CFTC is reviewing it now and I think expected to have an official ruling in mid-April,” he told analyst Stephen Grambling. “So I think that will obviously be an important thing to see. And we’re watching it carefully and looking at what happens there because if there is an opportunity that presents itself, we want to make sure we’re prepared for it. But that’s a big moment that we’re all still kind of waiting to see what happens on.”

On February 5, the CFTC declared it would conduct a roundtable on event contracts in about 45 days to “develop a robust administrative record with studies, data, expert reports, and public input from a wide variety of stakeholder groups to inform the Commission’s approach to regulation and oversight of prediction markets, including sports-related event contracts.”