Sports betting giant DraftKings is rumored to be in the process of purchasing prediction market software Railbird, but this potential purchase reveals a much more complex game of 3-D chess being played.
As DraftKings and FanDuel have unsuccessfully negotiated with the California Native American tribes, which control all gambling operations in the state, the betting operators are now exploring other options to gain access in the country’s largest state (39 million people).
“Online sports betting operators have struggled to find a path into California. And if a path doesn’t emerge, prediction markets will become increasingly appealing, especially if DraftKings and FanDuel feel like they’re losing ground to Kalshi and Polymarket,” Chris Grove, a sports betting angel investor who is a managing partner at Acies Investments and has a stake in Underdog Fantasy, told The Post.
Prediction markets, led by CFTC-licensed operators such as Robinhood, Crypto.com, and Kalshi, are now selling futures contracts as if they were stocks on real-world events that are occurring.
This new style of betting changes everything for the traditional betting operators, who previously had to buy a sports betting license from individual states at lofty costs.
Prediction markets legally operate in 50 states, offer better prices, require just one federal license, and no taxes are raised back to the state.
If things continue on under current regulations, online sports betting operators could be in some trouble.
Kalshi, in particular, has secured some significant wins in the courts, notably winning Kalshi vs. CFTC in September 2024. This decision allowed prediction markets to offer such products legally as commodity derivatives, thereby helping them gain nationwide legality.
They’ve been taking wagers on all things, including elections, whether the Astronomer CEO would resign after being caught with his alleged mistress at a Coldplay concert and even the projected critic review score of “Happy Gilmore 2.”
It leaves DraftKings with one clear question to answer in its attempt to compete with this sleeping giant in the online sports betting world.
“It’s largely a question of the legal and regulatory certainty surrounding prediction markets. A company like DraftKings is monitoring that question on a daily basis,” Grove told The Post.
“As the certainty improves, the appeal of prediction markets improves. If you ever got to a point where you had absolute regulatory and legal certainty, it’s not unreasonable that prediction markets could effectively displace traditional sports betting.”
California is undoubtedly a massive market that sportsbooks would love to offer their product in, but this business is all about control and the tribes want every bit of it and then some.
As we saw in Florida, Hard Rock Bet has a monopoly on sports betting in the Sunshine State and they’re doing pretty well.
California could opt for a similar model or build its own operation from scratch and hope to gain the trust of its clientele that way.
We’ve seen this fail too. Gambet in Washington, D.C. was mostly a disaster as it attempted to run sports betting as a lottery system.
That folded rather quickly and was replaced by FanDuel, as Gambet faced criticism for bad odds and clunky interface, among other problems.
Sports betting has been highly profitable for states that charge a percentage on profits ranging between 10 and 51 percent.
A gambling tax provision was even included in the “Big Beautiful Bill” that would change how bettors file taxes at the end of the year.
On Wednesday, three federally recognized California tribes — Blue Lake Rancheria, Mu-Wuk Indians and Chukchansi Indian — filed a lawsuit against Kalshi and Robinhood for their operations in the state as a form of sports betting.
It will be a landmark case with massive stakes both literally and figuratively.
And DraftKings, not named in the lawsuit, is certain to be wrapped up in it all.
Erich Richter is a brazilian jiu-jitsu blue belt but he has a black belt in MMA betting. During the football season he’s showcased massive profits at The Post in the player prop market the last two seasons. While constantly betting long shots, his return on investment is 30.15 percent since 2022.