The Sportsbooks Are Coming: DraftKings, FanDuel, and the New Event-Contract War

The two companies that built American online sports betting now both run federally regulated prediction markets. DraftKings Predictions launched in December 2025 in 38 states and moved onto DKeX — an exchange DraftKings owns outright — in late June; the company says annualized trading volume reached $11 billion in July. FanDuel Predicts, a joint venture with derivatives giant CME Group, launched the same December and, after a slow first half, is being restructured mid-flight, its sports contracts migrating to Crypto.com’s exchange. The prize: sports markets in California, Texas, Florida, and Georgia — states their sportsbooks can’t reach — delivered on CFTC rails whose legality is being fought over in federal court right now. As of August 2026, here is where the invasion stands and what it changes for Kalshi, Polymarket, and anyone trading event contracts.

What did DraftKings actually build?

DraftKings didn’t partner its way in; it bought the machine. In October 2025 it acquired Railbird, a startup holding a CFTC designated-contract-market license — the federal charter for an event-contract exchange — granted just four months earlier. Per DraftKings’ annual report, the closing price was about $18.3 million in cash and $28.7 million in stock, with contingent payments of up to $200 million. Call it roughly $47 million up front for a nationwide license.

DraftKings Predictions launched in December 2025 as a standalone app in 38 states, listing CME Group contracts while the Railbird exchange was rebuilt. Sports event contracts went live from day one in states where DraftKings’ sportsbook can’t operate — including California, Texas, Florida, and Georgia. By April the company was reporting $2.3 billion in annualized trading volume, about $1 billion of it retail consumer flow.

Then it took the keys. In late June DraftKings cut over to DKeX, the rebuilt Railbird venue, folding predictions into its flagship app and taking control of listings and the economics of every trade. By the August earnings call, annualized volume had hit $11 billion, more than 600,000 customers had traded in the first half — before a single NFL snap — and parlay-style “combos,” run through Crypto.com’s exchange, were approaching 20% of volume. CEO Jason Robins called the growth faster than expected, said cannibalization of the sportsbook is minimal, and promised to port college football and NFL volume onto DKeX this fall. Planned incremental spend on the segment in 2026: $200 million to $300 million.

What happened to FanDuel’s CME bet?

FanDuel chose the opposite architecture — rent credibility rather than buy a license — and is now redrawing it. FanDuel Predicts launched December 22, 2025 as a joint venture with CME Group, the world’s largest derivatives exchange operator, which holds 51% of the venture. It opened in five states — Alabama, Alaska, South Carolina, North Dakota, South Dakota — trading financial contracts first: S&P 500 and Nasdaq-100 levels, oil and gas, economic indicators. Sports contracts followed in states without legal online sports betting, and in June FanDuel added a second venue — Crypto.com’s CFTC-regulated exchange — for sports, entertainment, and combo contracts, starting with the World Cup.

Then came earnings. On August 5, FanDuel’s parent Flutter told investors the rollout ran behind schedule in the first half, second-quarter predictions revenue was immaterial, and second-half revenue will be roughly offset by customer-acquisition spending. The bigger disclosure: all of FanDuel Predicts’ sports contracts are moving off CME’s venue to Crypto.com’s exchange ahead of the NFL season. CME keeps its 51% stake but will process only the app’s non-sports trades — less than 1% of its activity, per Bloomberg. Sportico reported that CME declined to run parlays through its exchange, and quoted CEO Terry Duffy on the original deal:

“Our goal and objective had nothing to do with sports.”

Flutter’s stock fell more than 11% after the report. The venture survives on paper — but heading into football season, the world’s biggest derivatives exchange has stepped out of the sports business it was supposed to power, and FanDuel’s sports stack now runs on the same Crypto.com rails DraftKings uses for combos.

Why do sportsbooks want prediction markets at all?

Start with the map. DraftKings’ sportsbook operates in 27 states plus D.C. and Puerto Rico; its Predictions app offers sports markets in 18 more, per its August earnings call. Those include California, Texas, Florida, and Georgia — roughly a third of the U.S. population, with no online sportsbook access between them (in Florida’s case, none outside the Hard Rock monopoly), after years of failed ballot measures and stalled legislatures.

The mechanism that opens that map is federal preemption — contested, live, in multiple courts. The operators’ theory: event contracts listed on a CFTC-designated exchange are swaps under the Commodity Exchange Act, subject to exclusive federal jurisdiction that state gambling law cannot reach. That is Kalshi’s argument in more than a dozen states, and the sportsbooks are drafting behind it — Kalshi pays the legal bills; the precedent applies to every designated exchange. The scoreboard is split. In April, the Third Circuit held 2–1 that Kalshi’s sports contracts are likely swaps and that federal law likely preempts New Jersey’s gambling enforcement. In July, a federal judge in Manhattan held the opposite — New York’s gambling laws still apply — and New York’s attorney general then sued Kalshi on a theory her petition states in five words: “Each contract is a bet.” New Jersey has asked the Supreme Court to settle it. Our 50-state legality tracker and NY v. Kalshi hub follow every ruling.

The economics explain the rest. A New York mobile sportsbook license carries a roughly 51% tax on gross gaming revenue — the state’s petition notes its licensed books paid more than $1 billion in 2024. A federally regulated exchange charges trading fees, pays no state gaming tax, and — if the preemption theory holds — needs no state’s permission. If the theory prevails, the sportsbooks acquire a nationwide sports product at federal-registration prices. If it collapses, their prediction apps get geofenced back to roughly the footprint they already had. That asymmetry is why $47 million for Railbird was cheap: an option on the biggest regulatory unlock in American gaming, with a bounded downside.

What does this mean for Kalshi and Polymarket?

Scale first: the incumbents are still far bigger. New York’s petition says Kalshi reports $178 billion in annualized transaction volume; DraftKings’ July figure was $11 billion — the metrics aren’t identical, but the gap is an order of magnitude. Kalshi raised at a $22 billion valuation this year and is reportedly in talks at nearly double that. Polymarket has re-entered the U.S. through the licensed exchange it acquired and has NFL markets live. Nobody is ceding sports.

What the sportsbooks bring is what the incumbents lack: tens of millions of sportsbook and fantasy accounts, household brands, and war chests — DraftKings’ $200–300 million alone, plus Flutter recycling second-half Predicts revenue into acquisition. What the incumbents keep is liquidity — deep order books attract the next trader — plus breadth far beyond sports and, in Kalshi’s case, distribution through brokerages like Robinhood. The first real collision starts September 9, when the NFL season opens: Kalshi defending its lead, Polymarket back onshore, DraftKings porting football volume onto its own exchange, FanDuel relaunching its sports stack on Crypto.com — all chasing the same order flow at full spend. This is the season that decides whether prediction-market sports volume belongs to the exchanges that invented the category or the sportsbooks that invented the customer.

What does this mean for traders?

More venues is mostly good news: competition works on fees and spreads, and the same game priced on four venues is comparison shopping — and, when prices diverge, information.

But the venues aren’t interchangeable, and the differences are structural. An exchange matches you against other traders and earns fees; a sportsbook sets the line and holds the other side of your bet — the distinction that anchors our gambling-or-investing explainer. The sportsbook entrants blur it. DraftKings now controls what DKeX lists and the economics of each trade. Flutter told investors it expects roughly $50 million of market-making revenue this year — the sportsbook pricing engine taking the other side of trades on exchange rails. And parlay-style combos, the fastest-growing product on both apps, need a counterparty willing to hold correlated risk — usually a professional market maker, not another retail trader. None of that makes these products illegitimate; it means “it’s an exchange” tells you less than it used to. Read the fee schedule, and ask who is on the other side.

Access risk is real, too. The litigation that decides preemption decides where these apps operate, and states have already forced changes mid-stream — a Michigan court ordered certain Kalshi trades voided while the CFTC ordered them honored, a conflict never fully resolved. Anyone trading sports contracts in a contested state carries that legal risk on top of market risk. That is what the tracker is for.

Quick answers

Is DraftKings Predictions the same as the DraftKings sportsbook? No. The sportsbook is licensed state by state and holds the other side of your bet. Predictions is an event-contract product on CFTC-regulated exchanges — since late June 2026, primarily DraftKings’ own DKeX — where you trade against other participants and can sell before an event resolves. The two operate in different, partly overlapping sets of states.

What is FanDuel Predicts? FanDuel’s prediction-market app, launched December 22, 2025 as a joint venture with CME Group, which holds 51%. As of August 2026, its sports contracts are moving to Crypto.com’s CFTC-regulated exchange, with CME processing only the non-sports trades.

Why can sportsbook apps offer sports markets in California and Texas? Because the contracts trade on federally regulated exchanges, which — the operators argue — places them under exclusive CFTC jurisdiction rather than state gambling law. One federal appeals court called that likely correct; a Manhattan federal judge ruled it wrong; the Supreme Court has been asked to resolve it. Access could change with a single ruling — see our legality tracker.

Is trading sportsbook event contracts gambling or investing? Legally contested and economically in between. The honest answer runs the length of its own article.