The Closing Bell | DraftKings CEO: Prediction Markets 'Happening Whether You Want It To Or Not'
Prediction markets roundup: Kalshi's election betting court battle is over and the Pope betting aftermath.
DraftKings was the latest to answer a question about the future of sports betting via prediction markets on its Q1 earnings call.
Here’s what CEO Jason Robins said during Friday morning’s call on the subject of prediction markets:
Question: On the prediction markets, obviously a lot of moving pieces there, but I’m curious how your conversations with state legislators and tribes have evolved in the context of whether that’s catalyzing states that are not legal to refocus efforts in some way.
Robins: It’s definitely something they’re talking about. It’s still early days, so it’s hard to say at this point if it’s ‘catalyzed’ anything, because we haven’t seen any states who are like ‘yeah, we’re gonna do this now.’
But definitely step one, which as you noted, is getting their attention and making them start having those conversations, we’re seeing that happen.
I think, as it continues to grow, it’s going to continue being a powerful lever that this is happening whether you want it to or not, so do you want to do it in a way that makes sense -- if you’re a California tribe, or if you’re a state that hasn’t legalized it yet -- that allows you to prosper, or do you want to watch it happen somewhere else? I think that’s something that everyone’s talking about right now.
This also appeared in the Q1 business update:
We continue to actively monitor the events surrounding federally regulated Prediction Markets, including recent court cases.
Nothing ground-breaking here, but it’s the latest evidence that everyone in US sports betting is at least thinking about prediction markets to some degree.
Robins hits on what I think is a key point in all of this: prediction markets as a leverage/fulcrum point. Sports betting prediction markets may not go away. Meanwhile, states continue to consider higher taxes and more onerous regulations. Is that a good idea in a world where state-regulated sportsbooks have to compete with expanding nationwide sports betting exchanges? I’d argue it’s not.
Robins also pointed out California. Tribal gaming interests can (and should) try to fight the spread of nationwide sports betting. I would be shocked if we don’t at some point see a challenge to Kalshi’s model under federal tribal gaming law. But if Kalshi is here to stay — in California and everywhere — then this should absolutely result in tribes trying to unlock online sports betting in California. Will all of this actually help a sports betting push in the coming years? TBD.
I’d say it’s a less-compelling argument in a lot of other states. But yes, there is a case that states without online sports betting should want to think about getting into sports betting themselves, if it’s going to be in their states, anyway.
Other earnings call chatter on prediction markets this week:
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The Closing Bell
A roundup of prediction markets news, analysis and other thoughts:
Election betting is here to stay as federal appeal goes away: A lot of focus for prediction markets legally has been at the state level of late. But Kalshi was able to clear a different legal issue off its plate this week. The CFTC asked a federal appeals court to dismiss its appeal in the case about the federal government trying to stop election betting at prediction markets. The court obliged, and the case is now gone.
It was almost strange that this case was still going on, as it was an artifact of the Biden administration. It seemed clear that 1. the Trump administration was supportive of election betting at Kalshi in the run-up and the aftermath of the November elections and 2. the CFTC has been very permissive in letting Kalshi expand into sports betting. Given all that information, why would the CFTC keep pursuing a case to stop election betting?
The interest group Better Markets was not a fan: “By Dismissing Its Appeal in the Kalshi Case, the CFTC Turns Its Back on Election Integrity, Investor Protection, and Effective Oversight of the Commodities Markets | “Stephen Hall, Legal Director and Securities Specialist, issued the following statement on today’s decision by the Commodity Futures Trading Commission (CFTC) to abandon its appeal in KalshiEx LLC v. CFTC: ‘The CFTC has just voluntarily surrendered its fight to overturn a dangerous lower court decision that allows gambling on the outcome of congressional elections. That decision was bad law and even worse policy, as it threatens the integrity of our federal elections, promises a new wave of market manipulation and investor losses, and casts the CFTC in the role of election supervisor, something the small agency lacks the resources or expertise to do. Moreover, with this dismissal, the lower court decision will remain intact, setting a terrible and enduring legal precedent. This about-face, without any hint of a justification and after the case was fully briefed and argued by both sides, is an ominous setback for all Americans.’”
Speaking of those state cases: There hasn’t been much new, but we do have a response from Kalshi to Nevada’s motion to dismiss. Kalshi has sued three states, including Nevada, to try to stop enforcement of claims the platform is offering illegal sports betting.
If you want some analysis, go check out attorney Andrew Kim on Twitter/X.
And more coverage at Law360 (paywall).
Whole thing here:
Even though this has been mostly static this week, you can see the current legal status of prediction markets here.
Pope betting: Betting on the Pope turned into a lot of earned media for Kalshi. There were multiple stories every day about it. It’s one of the reasons why sportsbooks should see prediction markets as an opportunity, should they stick around and expand. The opportunities to get your brand in front of a wider audience are massive. Kalshi is a PR machine just by existing.
While the earned media front was undoubtedly a success for Kalshi, the day the Pope was announced was less than stellar.
There was a trading halt and ensuing downtime/stability issues with the platform, all around the time we learned a Pope had been chosen, and when the new Pope was announced. It’s not great for optics, and functionally terrible that the platform was down at a time when it absolutely needed to be up, for the integrity of Pope betting markets. (Yes, I really wrote the phrase “integrity of Pope betting markets.”) While Kalshi did say it was communicating with the CFTC on the matter, it declined the opportunity to give me on-the-record comment about the downtime beyond that. It’s not clear what more we’ll hear on this front from Kalshi or its regulator. I don’t think that’s going to cut it if Kalshi is going to continue to be a nationwide sports betting platform, or if the CFTC is going to be the regulator of nationwide sports betting. More on the exchange halt here.
Outside of the technical issues, none of the favorites at Kalshi became Pope. Now-Pope Leo XIV only had a 1% chance to be named Pope, per Kalshi (and Polymarket). Pietro Parolin was at one point the 70% favorite yesterday. All this would be fine if Kalshi hadn’t beaten us over the head in recent months that one of the reasons it’s so valuable is that it’s a “source of truth” and that it’s more accurate than other sources of information. It turned out not a valuable source of information on who would be Pope. Kalshi did somersaults and other gymnastics claiming how great it was because it was more accurate than polls for the presidential elections. If you want the flowers for that, you should take an “L” when your platform doesn’t get it right.
A really good read below on a possible reason why we saw the trading movement we did, also from Substack: “What could explain these price movements? We can probably rule out information leakage from inside the Chapel, since the price of the Prevost contract actually fell over this period. There was some information content in the timing of the announcement—traders might have interpreted a relatively quick decision as being good news for the early favorite. But the scale of the price increase, as well as the sharp initial decline in the price of the Tagle contract, suggests to me that the explanation lies elsewhere.
Here’s what I think happened. Although it’s clear in hindsight that there was no leakage of inside information, this was not known to traders in real time. They saw the price rising, and tried to interpret this. They knew that the identity of the new pope was known to those who had participated in or witnessed the vote, and the possibility that this information had made its way outside the Chapel walls could not be ruled out. That is, while no trader knew the identity of the new pope, they suspected that some other traders knew. And by treating the price movements themselves as informative, traders acted in ways that amplified these movements. This confirmed their suspicions, reinforced their actions, and quickly drove prices to levels completely out of step with the information available. In fact, aside from the timing of the announcement, there was no information available at all.”
And more here on this here, as well.
A Wall Street Company’s Nationwide Internet Gaming Venture is the Latest Challenge to the Tribal Gaming Industry (Native News Online): “There is another federal law that preempts state gaming laws and bears upon this issue: the Indian Gaming Regulatory Act (IGRA). There’s also another federal commission that oversees the implementation of that law: the National Indian Gaming Commission (NIGC). IGRA requires all gaming conducting on Indian lands to be licensed by the governing Tribe pursuant to an ordinance that has been approved by the NIGC. Anyone operating gaming on Indian lands without that license is in violation of IGRA. This includes companies that allow people on Indian lands to access apps to bet on sports. Kalshi is allowing people to bet on the outcome of sporting events from anywhere in the United States. They have not had to obtain a tribal or state gaming license. Nor have they paid taxes or revenue sharing payments to any state or tribe at the same level as other gaming operators. This is a valuable competitive advantage. No federal agency or court has answered the question of whether Kalshi’s activities constitute ‘gaming.’ In fact, in a separate before the United States Court of Appeals for the District of Columbia, Kalshi filed a brief earlier this year in which it stated that wagers on the outcome of events like the Super Bowl would be ‘gaming’ that is prohibited by the CEA.”
If the state-level challenges run out of steam — and even if they don’t — it feels like a tribal challenge will emanate from somewhere. One likely candidate would be the Seminole Tribe, which holds a monopoly on sports betting in Florida.
CFTC Staff on Leave Pending Investigation (press release): “WASHINGTON, D.C. — The CFTC is committed to holding employees to the highest standards, as expected by American taxpayers. Pursuant to the President’s executive orders on lawful governance and accountability, the CFTC has placed staff on administrative leave for potential violations of laws, government ethics requirements and professional rules of conduct. Investigations are currently ongoing into these matters and the CFTC will provide updates as appropriate.”
More from Better Markets: “Cantrell Dumas, Director of Derivatives Policy at Better Markets, issued the following statement regarding the release of a new fact sheet titled “Stop the Spread: Why the CFTC Must Shut the Door on Gambling in Derivatives Markets”: ‘Congress made it clear that contracts involving gambling, like betting on sports, do not belong in federally regulated derivatives markets. But instead of enforcing that statutory firewall, the CFTC continues to sit on its hands while sports betting-style contracts spread across exchanges it oversees. … For months, the CFTC said it needed time to study the issue and pointed to its planned roundtable as part of that process. That seemed to be the reason it was holding off on stopping any sports betting-style contracts. But now the roundtable has been quietly canceled, and the CFTC still hasn’t lifted a finger. It’s starting to look like the roundtable was just a ‘head fake’ to cover up the fact that the CFTC has no intention of stopping these contracts. 'The CFTC still has time to regroup and shut down the spread of gambling contracts before it sidelines its core mission. Because if this trend continues, the CFTC won’t be protecting farmers, energy producers, or the broader economy. It will be too busy refereeing bets on football games.’”
Ridiculous things you can
bettrade on at prediction markets:Polymarket edition: “What will happen before GTA VI?”; Jesus Christ returning has a 14% chance of happening before the release of the anticipated video game, per Polymarket. I do love people that bet on this. Do you plan on collecting this bet if you win?
Kalshi edition: Not up yet, but now self-certified by Kalshi: “Will there be any prisoners housed on Alcatraz before ‘date’?”
I’m not sure I agree with all of this, even though I have been a critic of Kalshi, but in the interest of creating a complete roundup, here it is:
Other things I have published this week on prediction markets
NBA Betting Accounted For 40% Of Trading At Kalshi Last Week
The NBA was by far the most popular set of markets to trade at Kalshi last week, accounting for more than 40% of all volume, according to data from the prediction market platform.
Sports market update
Here are the sports markets that Kalshi currently offers as of Friday morning (Bold and italics for additions since last week). Not much change this weel:
Basketball, 8 + game-winner markets: Moneyline betting on single games, playoff series winners, NBA and WNBA futures markets.
Baseball, 11 + game-winner markets: Moneyline betting on single games, World Series, AL, NL and division winner markets; 2025 College World Series champion; and 2026 World Baseball Classic champion.
Football, 18: College football champion, college conference champions, Super Bowl champion, NFL division and conference winners, and UFL champion and “will the tush push be banned?”
Soccer, 6 + game-winner markets: League futures for various international leagues.
Tennis, 4 + single-match markets: Champions of major tournaments; currently no other tournament or single-match markets.
Golf, 7: Current PGA Tour and LIV Golf events. Major men’s tournament winners and team competition winners.
Motorsports, 8: Upcoming Formula 1 race markets, Drivers Champion, Constructors Champion and props; Indy 500 winner.
Hockey, 7 + game-winner markets: Moneyline betting on single games, playoff series winners, Stanley Cup winner, conference final winners.
Cricket, 1: IPL winner.
eSports, 1: League of Legends champion market.
Mixed martial arts, 5: Five fights from UFC 315 main card.
Other platforms:
Crypto.com offers a much smaller portfolio of markets, but does allow betting on single NBA and NHL games.
Robinhood offers NBA and NHL futures markets, including series winners.