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Sports betting giants FanDuel and DraftKings have resigned from their membership in the American Gaming Association (AGA) as the companies plan to launch prediction markets in the coming months.
The markets are a make-or-break issue for the AGA, which views them as unregulated markets outside the organization’s mission to “foster a policy and business environment where legal, regulated gaming thrives.”
The withdrawals mark a significant moment in the current U.S. gaming market.
“This is a bad breakup that illustrates the depth of the rift that we’re seeing develop in the gambling industry,” CNBC correspondent Contessa Brewer said in a Money Matters segment earlier this week.
“The companies say they’re abandoning their AGA memberships because of the direction of online betting. Increasingly, they’re tied to the booming prediction markets, and that doesn’t align with what the AGA is doing. The AGA has taken a firm stand against these event contracts that offer sports.”
Where the US prediction market is today
Prediction market sites have become popular over the past few years. Instead of offering bets based on house-generated odds, prediction markets allow individuals to buy and sell contracts based on future outcomes of events such as sports competitions, elections, and more.
The “bets” that users make are actually binary “yes” or “no” predictions. If you buy a yes contract and the event happens, you win, and vice versa.
Prediction markets have been around for a long time, KPMG noted, but it wasn’t until Kalshi won a federal court case in 2024 that the markets exploded in popularity as they allowed users to create contracts for a wide range of events, including sports.
“Since Kalshi’s 2024 legal victory, prediction markets have expanded to offer event contracts based on crypto, climate, economics, financials, companies, and—most controversially—sports,” KPMG wrote.
This past month, Yahoo Finance highlighted that Kalshi’s valuation went from $2 billion in June of this year to $5 billion in August. Polymarket is another notable prediction market, and over the past year, trading platforms such as Robinhood and Coinbase have worked on their own prediction markets.
FanDuel, DraftKings partnerships point to new gaming realities
FanDuel and DraftKings have both made moves this year to create their own prediction markets. This past week, FanDuel announced it was partnering with Wall Street firm CME Group to launch a prediction markets platform in December.
The platform will provide users with contracts for baseball, basketball, football, and hockey. Additionally, the platform will be available in all states (even where sports betting is not yet legal) but not on tribal land.
“We can’t wait to bring FanDuel’s proven approach to market innovation into this dynamic sector,” FanDuel CEO Amy Howe said in a statement. “Our partnership with CME Group allows us to leverage their deep market expertise built over decades while delivering the seamless, accessible experience our customers expect.”
DraftKings made its prediction-market move late in October when it announced it acquired prediction market Railbird. DraftKings will use the company’s technology to launch its own prediction market, DraftKings Predictions, “a forthcoming mobile application that will allow customers to trade regulated event contracts on real-world outcomes across finance, culture, and entertainment,” the announcement said.
“We are excited about the additional opportunity that prediction markets could represent for our business,” DraftKings CEO Jason Robins said. “We believe that Railbird’s team and platform—combined with DraftKings’ scale, trusted brand, and proven expertise in mobile-first products—positions us to win in this incremental space.”
Brewer noted in her CNBC segment that sources told her that the AGA’s board was considering a rule change that would exclude from membership any operator involved in prediction markets.
“Basically, you’ve got Fanduel and Draftkings going, ‘Well, if you’re going to kick us out, we’re going to leave before you do that,'” she said.
