FanDuel and DraftKings have exited Nevada after its regulator said launching sports contracts through their prediction markets businesses was incompatible with state gaming law.
The Nevada Gaming Control Board (NGCB) yesterday (12 November) accepted the surrender of FanDuel parent Flutter Entertainment’s licences, as well as approval for DraftKings to withdraw its own licence application.
This came, the regulator said, due to both companies “intending to engage in unlawful activities related to sports event contracts.”
The news came hot on the heels of Flutter announcing it would launch sports contracts next month in its previously announced prediction markets partnership with CME, FanDuel Predict – which its Q3 report revealed will see each partner receive 50% of revenue.
Meanwhile, DraftKings will launch sports contracts itself very soon after acquiring CFTC-registered business Railbird as its vehicle.
The NGCB wrote: “This conduct is incompatible with their ability to participate in Nevada’s gaming industry. The board takes seriously its obligation to operate a thriving gaming industry and to protect Nevada citizens.”
The news marks the strongest evidence yet that operators are risking some of their state gaming licences by entering the prediction markets space.
While FanDuel was only licensed in Nevada for a retail sportsbook, other states taking the same line could prove more costly – although the operator’s management struck a bullish line on the earnings call about further risk.
Flutter strikes bullish tone after Nevada exit
Peter Jackson, Flutter CEO, said: “Look, whilst we’re sad to have to surrender the licence, that’s what we’ve done. Nevada were protecting their interest. We need to protect our interest. And FanDuel Predicts will allow us to go after the half of the market that we haven’t previously been able to go after.”
The chief executive added that he believes the main opportunity for prediction markets is in states without legalised sports betting, as the business has so far seen negligible impact to its online betting operations in existing states.
“Our launch strategy has been developed in close consultation with state regulators and tribal authorities, resulting in a tailored, state-specific approach that enables us to launch in those states where no local regulation exists,” Jackson wrote in a letter to shareholders.
The use of prediction markets, he added, will allow the integration of players into the FanDuel ecosystem ahead of betting legalisation – and said the company plans to spend $200m to $300m on the product in 2026.
Jackson also highlighted the company’s extensive experience in operating betting exchanges through Betfair. “I think means we’re going to be a very formidable competitor,” he said.
Analysts at Truist Securities said: “With management exiting just one state (Nevada – which drives immaterial revenues to FLUT) in advance of launching FanDuel Predicts, we believe they have comfort that they won’t need to exit any other OSB markets.
“Management appears excited on the potential prediction TAM as well as the possibility for further legalisation of OSB. We also think the prospect of sports prediction competition could dissuade existing taxes from increasing taxes.”