Key Moments:
- Several high-profile M&A deals have taken place in the prediction markets sector, including partnerships involving Underdog, Crypto.com, FanDuel, CME Group, and DraftKings’ pursuit of Railbird.
- Industry leaders and analysts have raised concerns that regulatory loopholes, rather than innovation, are fueling these moves, potentially reshaping competition and consumer protection.
- Regulators and market experts have highlighted significant regulatory, financial, and responsible gambling risks as the sector evolves.
Industry Shifts Spark Fresh M&A Activity
Prediction markets are experiencing a sharp rise in mergers and acquisitions. Deals include Underdog’s venture with Crypto.com, FanDuel teaming with CME Group, and DraftKings’ reported interest in Railbird. Analysts caution that regulatory loopholes, not innovation, may be driving these moves. This shift could reshape both competition and consumer protection.
From Niche Interest to Financialized Betting
Prediction markets once centered on academic and political forecasting. Now they are evolving into platforms that resemble financial markets for sports betting. Kalshi, for example, has expanded into sports-based contracts and added new offerings before the NFL season. These prop-style and parlay-style markets mirror sportsbook models. Still, regulators question whether presenting them as financial instruments is legitimate.
In September, Underdog introduced sports event contracts in partnership with Crypto.com. It was the first sportsbook operator to launch these products. Freelance iGaming Consultant Aydemir Yuksel told SiGMA News, “Underdog is definitely moving in the right direction.” He praised the company’s strong growth compared to larger rivals. However, he also warned that relying on a single crypto payment provider creates long-term risks.
Longtime Nevada sportsbook director Robert Walker commented to SiGMA News, “We’re talking hundreds of millions in lost licensing fees and tax revenue. And for what? So, the CFTC can let these companies do an end-run around state law?”
Established Operators Employ Federal Channels
The approach among major incumbents varies. FanDuel’s partnership with CME Group gives it access to financial event contracts such as GDP and S&P markets. These are regulated by the Commodity Futures Trading Commission (CFTC) instead of state gaming laws. Meanwhile, DraftKings’ bid for Railbird—a federally licensed US prediction market—signals an aggressive push into this less-regulated space.
DraftKings has also applied with the National Futures Association through Gus III Holdings LLC, seeking permissions to function both as a Swap Firm and an Introducing Broker, despite indicating in its fiscal outlook for 2025 that a Prediction Markets offering is not included.
Expert Criticism and Competitive Challenges
Industry views on the progressiveness of these moves are split. “Maybe 10 percent is actual innovation, but 90 percent is just finding a way to take sports bets without dealing with state oversight,” Longtime Nevada sportsbook director Robert Walker told SiGMA News. He argued that such strategies cater more to financial self-interest than to addressing consumer needs, while bypassing burdensome licensing and tax structures.
Walker described M&A trends as undermining market fairness: “When FanDuel teams up with CME Group or DraftKings goes after Railbird, what they’re really doing is creating a back door into sports betting. They get to offer the same product as licensed sportsbooks without jumping through all the hoops.” He emphasized that this makes it especially difficult for smaller competitors already burdened by high costs. “It’s completely unfair to the smaller guys,” he said. “How is that supposed to work? It’s not a level playing field at all.”
Regulatory Uncertainty and Jurisdictional Tensions
Disagreement between state gambling authorities and the federal CFTC is central to the ongoing debate. If prediction contracts are treated as commodity trades, operators can bypass state licensing rules. That would also eliminate a major source of state tax revenue. The CFTC allows event contracts under federal law. However, states such as New Jersey, Nevada, and Maryland argue these platforms break local laws, and they have issued cease-and-desist orders. “States are going to get crushed financially if this keeps up,” Walker warned.
The sector’s opacity is also a point of concern for technology and civil rights observers. Anna Dent, lead researcher at Open Rights Group, told SiGMA News, “My instinct is that this will lack transparency over how it works and what the risks are.”
Walker expressed further skepticism, stating, “I’ve been in this business for over 35 years, and I’ve never seen anything like this. This isn’t how the industry normally evolves—this is companies exploiting loopholes and a CFTC that seems more interested in helping them than protecting the public interest. It’s opportunistic, not evolutionary.”
Responsible Gambling Front and Center
Responsible gambling issues represent a core area of concern amid the rise in prediction market M&A. “Responsible gambling risks are critical to evaluate,” Keith Whyte, President of Safer Gambling Strategies LLC, told SiGMA News.
“Most sports bettors and traders are young, educated males—characteristics associated with higher risk for gambling problems. The amount of money traded on exchanges may soon dwarf that on sportsbooks, which means a trader with a gambling problem may be able to lose a lot more money.” Whyte added that the risks cut both ways, “Sports bettors may develop trading problems, and traders may develop gambling problems.”
“You can look at the clinical criteria for gambling addiction and substitute ‘trading’ for ‘gambling’ and everything still fits.” — Keith Whyte, President of Safer Gambling Strategies LLC
Whyte acknowledged the potential for better consumer protections if prediction markets are managed by established gaming operators, provided stringent standards are enforced. He advocated for universal measures across the ecosystem: “Same minimum age, same suite of strong protections, across sportsbook, daily fantasy, prediction markets and casino,” he said. “If done right, this could be a chance to ensure consistent safeguards.”
He emphasized that “every sports prediction site should have consumer protections which meet or exceed National Council on Problem Gambling’s (NCPG) Internet Responsible Gambling Standards.” Without such protections, operators confront “enormous regulatory and reputational risks.”
Whyte also pointed to global risks linked to unregulated gambling products, sometimes offered by the same company alongside regulated offerings. He further stressed that companies must adhere to individual state restrictions on offering gambling-like products.
Upcoming Decisions and Sector Outlook
With more deals on the horizon, Walker anticipated that legal sports contracts could draw even larger players than current entrants, potentially threatening crucial state tax revenues. This evolution could redefine the financial base of state-regulated gambling, the structure of industry competition, and the boundaries of sports betting.
A joint CFTC and US Securities and Exchange Commission (SEC) roundtable is scheduled for 29 September to address event contracts and prediction markets. The agencies already caution that such “novel products” are fraught with legal ambiguities and uneven oversight. As Walker puts it: “Why is the CFTC letting sports betting companies pretend they’re commodity traders? If it looks like sports betting, acts like sports betting, and takes money like sports betting, then it should be regulated like sports betting—by the states.”
Notable Recent M&A and Regulatory Moves
| Company | Partner/Target | Key Move |
|---|---|---|
| Underdog | Crypto.com | Launched sports event contracts through partnership |
| FanDuel | CME Group | Formed alliance to enter financial event contracts under federal oversight |
| DraftKings | Railbird | Pursued acquisition of a federally licensed prediction market |
| DraftKings | NFA (via Gus III Holdings LLC) | Submitted application to operate as Swap Firm and Introducing Broker |
Industry Conferences
Looking ahead, SiGMA Central Europe is set to take place in Italy from 03-06 Nov 2025, promising to gather 30,000 delegates, more than 1,000 exhibitors, and over 550 expert speakers.
- Author
Daniel Williams
