The Last 24 Hours Have Been A Sea Change For Prediction Markets
Breaking down the NHL's deals with Kalshi and Polymarket, and DraftKings' entrance into the prediction markets industry.
So, has anything happened since the last time I published this newsletter?
DraftKings announced it acquired an exchange and will be getting into prediction markets.
Kalshi and Polymarket did deals with the NHL.
Just a few small pieces of news.
I am going to try to pull all of this together into a coherent narrative — or at least a series of salient points — maybe successfully, maybe not. Let’s give it a go.
And if you’re still getting caught up before we jump into all of this:
1. The only constant is change
The news cycle of prediction markets is inexorable. Did you think you had everything figured out? Wrong. Here are two more giant disruptions for us to deal with.
To be fair, I have been pricing DraftKings as a favorite to get into prediction markets by the end of the year. The narrative for the publicly traded sportsbooks has been brutal in recent months with the rise of prediction markets. Sitting on their hands was terribly unlikely. As Eilers’ Chris Krafcik noted on social media, DraftKings buying Railbird restores a ton of value to the company no matter what happens next in prediction markets. Arguably a no-brainer.
Rumors of a league doing a deal with Kalshi/Polymarket have been circulating for weeks. I never had it on the record that I could report it (obviously), but it wasn’t exactly a secret that something was going to happen.
But step outside the granular news on both fronts and look at the broader landscape: Can anyone really make absolute statements about prediction markets right now with any conviction? Stuff changes by the minute.
2. Sports are (almost certainly) coming to FanDuel and DraftKings prediction markets products
The worst-kept secret in prediction markets and sports betting is that the two gambling behemoths are coming for sports event contracts. Both have been a bit coy, and they won’t risk a gambling license for it. But they are likely going to find a way to thread the needle in at least some cohort of states and launch (ahem, Texas).
Here’s an excerpt from a note issued Tuesday by Citizens’ Jordan Bender following the DraftKings deal:
The release noted it is set to launch in the coming months, and we believe a sports-related offering will be out sometime around the New Year. Initially, the company will be leveraging “multiple exchanges,” but we believe CME Group’s announcement last week that it intends to offer sports contracts and Flutter’s involvement implies DraftKings will use the reputable CME as an exchange provider at launch until it can integrate Railbird onto the DraftKings platform. There have been enough breadcrumbs dropped in the last several months that lead us to believe it will launch sports into states without legal sports betting under a base case scenario. However, we note DraftKings does not have exposure to several states with legal sports betting, which affords it the ability to enter states like Delaware.
Both companies have been hedging their bets in their forward-facing comms, indicating that sports are in the plans while also making it clear they don’t want to piss off regulators. It’s a high-wire act, for sure.
If we are merging the narratives here, the NHL deals theoretically help out the Big Two immensely. Here’s my rationale:
States don’t like prediction markets, and some states have gone so far as to say a sportsbook’s license could be in danger for offering sports prediction markets in other jurisdictions.
I think that’s going to be an increasingly difficult line to hold after the NHL deal. Why? A major North American league just did a licensing deal that puts a stamp of approval on sports betting in 50 states. We’re probably also going to get team-level deals around prediction markets. After all that, you’re going to turn around and pull a sportsbook’s license if they offer sports betting in states other than your own? I get where the states are coming from, but that’s a pretty rough way to approach the problem.
It doesn’t mean states have to stop trying to protect their turf, sending cease-and-desist letters, or challenging Kalshi et al in court. But I think everyone is going to have to reassess their priors.
One other side note: I think there’s some amount of “safety in numbers” with FanDuel and DraftKings jumping into the pool. If both of them do this, are you going to turn off 80% of your sports betting industry overnight? That’s kind of hard to imagine happening if FanDuel and DraftKings push forward.
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3. The NHL deals don’t matter at all and matter immensely
Betting on hockey is peanuts. It’s not important. It’s slightly more than a rounding error in state-regulated sports betting and at Kalshi from publicly available data. (It’s roughly 2% of handle/trading volume). If hockey dropped off the face of the planet, sportsbooks would be just fine. Kalshi and Polymarket now get to use league marks? Great. Who cares.
What is important: The legitimacy that the entire prediction markets category just got from this deal with a major North American sports league. I don’t think it can be overstated how significant this is for optics and the narrative moving forward. Every league, every company that is thinking about its plan for prediction markets (or its hesitation to touch it with a 10-foot pole) is going to have to take a hard look at what is next.
My guess is the NHL vastly underpriced what it was handing Kalshi and Polymarket, which is infinitely more valuable than the more tangible things they got out of the deal. They likely should have gotten another zero on the deal for the value they are passing on.
4. How does the rest of the regulated gambling industry respond to all of this chaos?
Well, let’s start with the statement I just got from the American Gaming Association. The AGA didn’t mince words:
“The NHL’s decision to license its intellectual property to Kalshi and Polymarket—a pair of prediction market platforms operating outside of state-regulated gaming frameworks—is deeply concerning. Contrary to the league’s claims, the future of these platforms is far from certain, evidenced by the legal proceedings in multiple states, the views of well over half of the nation’s attorneys general, and state regulators determining these platforms to be illegal.
This move sends a troubling message: that integrity, responsibility, and clear legality are optional in sports gaming. The platforms in question fail to comply with essential standards. Worse, they are currently offering sports wagers in all 50 states to anyone 18 years of age—some of which have not authorized any form of legal sports betting and those that have largely define 21 as the prevailing legal age for wagering.
Over the past seven years, the legal U.S. sports betting market has proven that a transparent, accountable, and regulated system benefits everyone—fans, leagues, states, and most importantly, consumers. Undermining that success with backdoor gambling schemes masquerading as ‘financial products’ is reckless and shortsighted.
The American Gaming Association will continue to advocate forcefully that the Commodity Futures Trading Commission enforce its own rules. Sports wagering—by any name—is not under the CFTC’s jurisdiction. And no professional league should lend its brand to companies operating in defiance of state law and consumer protection norms.”
Well, that seems pretty clear-cut. Prediction markets are bad. It’s kind of wild for the AGA to come out this forcefully against a league, but battle lines are being drawn, and it’s not clear everyone really knows all the knock-on effects that the expansion of prediction markets will create. The narrative around responsible gambling and prediction markets is not one we have seen reach a critical mass, but it’s likely to come front and center as time goes on.
We should also note that FanDuel and DraftKings are AGA members (:eyeball emoji:).
If I were companies like BetMGM, Penn Entertainment (ESPN Bet) and Caesars waking up to this news this morning, I probably have a lot of questions.
BetMGM, in particular, has been very outspoken against prediction markets and is also an official partner of the NHL. Here is BetMGM CEO Adam Greenblatt just last week:
As the law stands today, sports prediction markets are, in essence, illegal sports betting.
I would be extremely not happy if I were Greenblatt. But, like I said above, are they going to have to reassess as their competitors push into sports betting via prediction markets and as prediction markets gain legitimacy? Stay tuned, I guess.
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I am sure I will have more thoughts here and at The Closing Line in the coming days. But buckle up: The era of competition in US prediction markets is going to be fascinating.
Before we move on to :waves arms: other prediction markets news, here’s the full press release from the NHL:
The National Hockey League (NHL) today announced new landmark multiyear U.S. agreements with Polymarket and Kalshi, naming both Kalshi and Polymarket official prediction market partners of the NHL.
The opportunity provides Polymarket and Kalshi with access to official NHL proprietary data and rights to use NHL marks, logos and official designations on their platforms and products. Kalshi’s and Polymarket’s brokers and merchants will also be able to use NHL marks and logos to identify the Polymarket and Kalshi products that they make available. Both companies will also receive brand exposure via Digitally Enhanced Dasherboards (DED) and blue line slot virtual signage on NHL game broadcasts including regular season national games, Stanley Cup Playoffs games and NHL Winter Classic and NHL Stadium Series national broadcasts.
“As prediction markets continue to evolve at a rapid pace, partnering with the two market leaders, Kalshi and Polymarket, provides a tremendous opportunity for the broadest fan engagement during the NHL season,” said Keith Wachtel, President, NHL Business. “Polymarket and Kalshi are ideal partners as this category continues to grow and expand.”
“The NHL has always been about giving fans an incredible experience. We’re excited to bring that energy to Polymarket, where fans can engage with the NHL and its teams in a new way,” said Shayne Coplan, Founder and CEO of Polymarket. “Together, we’re making the game more interactive and connected, and we appreciate the support of the NHL in recognizing the future of fan experiences benefits from engagement with prediction markets.”
“Teaming up with the NHL is an important milestone for Kalshi and the industry at large. To have a league like the NHL embrace Kalshi is a testament to the integrity, safety, and trust with consumers that Kalshi has spent years building during our time pioneering this asset class,” said Tarek Mansour, CEO of Kalshi. “It should be clear now -- prediction markets are here to stay.”
And one more final note: Polymarket’s clearing organization will be involved with DraftKings via that Railbird deal. (The fact that Railbird was clearing through the company Polymarket bought is not new news, but is interesting with all the moving parts.) Polymarket CEO Shayne Coplan:
Prediction markets news roundup
Jupiter DEX Launches Kalshi-Powered Prediction Market for F1 Mexico Grand Prix Winner (CoinDesk): “Jupiter, a Solana-based decentralized exchange (DEX), started a prediction market with the inaugural event tied to the outcome of the forthcoming Formula One Mexico Grand Prix. The platform, powered by Kalshi, a leader in event-driven trading, invites fans and traders to speculate on whether their preferred driver, including Max Verstappen, Lando Norris, Oscar Piastri, George Russell or others will claim victory. The race will take place on Oct. 27, starting at 19:00 UTC and will comprise 71 laps.”
More than one person has sent me this news asking, in essence, “How is it cool to have Kalshi’s CFTC-regulated markets traded on chain and with no KYC?” And I am not sure I have an answer to that. I’ll try to circle back when we all have some time to breathe.
Polymarket fully integrates Solana (Twitter):
Polymarket + World App (press release): “There’s a new Mini App for the real human network: Polymarket. Starting today, the Polymarket Mini App can be accessed within World App.* The launch comes shortly after new Mini App milestones: 100 million downloads and 1.5 billion opens. Prediction markets have exploded in popularity over the last 12 months and are empowering the wisdom of the crowds to take center stage. With high levels of engagement across the world, prediction market apps are putting humans at the center of sourcing collective insights and embedding transparency into real-world questions – which is becoming essential in the AI age. The launch of the Polymarket Mini App makes it easy for World App users to put their wisdom to work with Worldcoin (WLD) or USDC in their wallet.”
“What the integration does:
In-app handoff: Discover and open the Polymarket Mini App from World App.
Optional funding via a third party: If you choose to fund a Polymarket balance, supported assets in your wallet can be exchanged to USD by third-party provider Daimo for use in the Polymarket Mini App.”
“World App users can download and access the new Mini App today in countries where Polymarket’s services are permitted.*”
A note specifically to people at Kalshi: The rest of you can read this too, but this is for anyone at Kalshi that reads this newsletter.
Kalshi won’t respond to my emails. I basically stopped asking them for comment because it’s a waste of time.
I wrote a post yesterday about how Kalshi advertised their platform on Instagram as “kind of addicting.” I would have been happy to get comment from Kalshi before I ran it, but I didn’t even bother. I haven’t gotten a response from their lead comms person on anything in months.
On Tuesday afternoon, I got a statement from Kalshi about the IG post, which I didn’t ask for. I responded saying I would be happy to include it in my newsletter if they start responding to my requests for comment on other topics. (To be clear, I am not bothering them for stuff all the time, only when I think it’s important.) I got no answer. So I am not including it. I did put it on Twitter if you’re curious what they said.
So, here’s the deal, Kalshi: If you want to have your voice in my newsletter, you don’t get to pick and choose when it’s worth talking to me or when it’s only convenient for you. It’s a two-way street. I’ll include your statements when you start answering. Thanks for your attention to this matter.
Fascinating. It realy feels like the prediction market landscape is shifting at an exponential rate. Do you think this push from established players like DraftKings ultimately legitimizes the space, or just makes the regulatory picture even more complex? Great analysis, as always, keeping us on top of these fast-moving developments.