DraftKings is taking its prediction markets in-house. It has launched its awaited proprietary prediction markets exchange, which it has called DKeX.
Made possible by the operator’s acquisition of registered designated contract market (DCM) Railbird Technologies last fall, it allows the gaming giant to take ownership over its event contracts content and operations, including making its own markets.
Until now, DraftKings Predictions has offered markets from the likes of CME Group and Crypto.com. Now, it will leverage the technology and the Commodity Futures Trading Commission (CFTC) license it holds via its Railbird acquisition for DKeX, and will roll the new exchange platform into its DraftKings: Sports & Casino “super app”.
In a DraftKings press release announcing the development, the operator specifically noted that DKeX will strengthen its ability to deliver differentiated sports experiences across the country alongside its leading sportsbook.
“DKeX provides a vertically integrated foundation for DraftKings Predictions, strengthening our prediction markets content and capabilities, giving us greater control over the technology that powers those offerings, and enabling us to move faster as we continue enhancing our unified app,” said CEO Jason Robins.
DraftKings hits the accelerator
DraftKings launched Predictions in December in 38 states and has since expanded it to 48 states, with Maine and New Hampshire the only exceptions.
It offers sports event contracts in 18 states and has evolved to add sportsbook-like features such as:
- Player props and parlay-style combos
- MLB player and futures contracts
- More NBA and NHL markets
- International sports options
- A “Live” tab that allows Predictions customers to interact in real-time during sporting events
The firm stated earlier this month that in May, its Predictions offering grew 24% month-over-month in annualized consumer volume and 34% in annualized total volume traded, respectively. In Friday’s release, DraftKings said that more than 30% of customers have used combination contracts since they launched in mid-May, “highlighting strong demand for a customizable, sports-first prediction markets experience.”
Robins said in May that time that the prediction markets vertical was “still in its first inning”. For DraftKings, we’re now into the second.
“The launch of DKeX and its integration into our unified app is a major step forward in delivering a best-in-class customer experience in sports nationwide,” said DraftKings Senior Vice President and General Manager of Prediction Markets Jeanine Hightower-Sellitto in Friday’s release.
“The pace of development across Predictions has been substantial, from expanding our event contract offerings to introducing key features like combos, which customers have quickly embraced.
“DKeX is the latest milestone in that progression and creates new opportunities to further expand the offering ahead of some of the biggest moments on the sports calendar.”
Analysts estimate big impact from Railbird integration
Last week, analysts at Citizens detailed the impact they believe that DraftKings launching its own Railbird-powered exchange will have on the company’s prediction markets trajectory.
“Currently, the company has no meaningful market-making activity and little volume flowing through its exchange, implying that the figures reported to date are relatively insignificant from an earnings perspective,” wrote Jordan Bender and Isabelle Slavin on June 19.
“… By the NFL season, we expect DraftKings could begin routing a significant amount of volume through its exchange, away from CME and Crypto.com, while simultaneously making markets in a more meaningful way on both its own exchange and third-party platforms.”
The analysts described market-making as “the most attractive layer” of the event contracts business.
“Our discussions suggest that market making offers superior economics relative to nearly every other area within consumer discretionary, providing a compelling and durable runway for growth for DraftKings.”
