DraftKings and FanDuel Exit AGA Over Prediction Market Dispute

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In a significant shake-up for the gaming industry, major sports betting operators DraftKings and FanDuel have announced their immediate resignation from the American Gaming Association (AGA). The departure stems from a fundamental disagreement over the regulation and classification of prediction markets, a rapidly growing segment of the betting landscape.

Key Takeaways

DraftKings and FanDuel have withdrawn their memberships from the American Gaming Association.
The primary reason for their exit is a disagreement over prediction markets.
Both companies plan to launch their own prediction market platforms.
The AGA opposes prediction markets, viewing them as akin to illegal sports betting.

The Prediction Market Rift

The core of the conflict lies in the differing views on prediction markets, which allow users to trade contracts based on the outcomes of future events, including sports. While DraftKings and FanDuel see these as a natural evolution and a distinct product, the AGA maintains that they function as illegal sports betting and should be regulated by state gaming authorities, not federal financial regulators.

This divergence became apparent during a recent AGA Public Policy Committee meeting. Following discussions, both DraftKings and FanDuel communicated their decision to leave the trade organization. The AGA confirmed it accepted their requests to relinquish membership, stating a desire to maintain close ties with the companies in its mission to promote legal, regulated gaming.

Company Statements and Future Plans

DraftKings stated that as its business strategy evolves, including its ventures into prediction markets, it determined its plans no longer fully align with the AGA’s direction in certain areas. Similarly, FanDuel cited that its expansion into prediction markets is not aligned with the AGA’s current priorities for its member operations.

Both companies are actively preparing to launch their own prediction market platforms. FanDuel announced "FanDuel Predicts" in partnership with the CME Group for a December launch, while DraftKings recently acquired Railbird, which holds a federal license for event contracts. This move into prediction markets is seen as a significant strategic pivot for both operators.

AGA’s Stance and Industry Impact

The AGA has been vocal in its opposition to prediction markets, citing a study indicating that 85% of American adults believe sports event contracts constitute gambling and should be overseen by state gaming regulators. AGA President and CEO Bill Miller has emphasized that consumers expect prediction markets offering sports event contracts to adhere to the same rules and safeguards as regulated sportsbooks.

The withdrawal of DraftKings and FanDuel, two of the largest players in the U.S. gaming market, represents a notable blow to the AGA. Their departure highlights the growing tension between established industry bodies and innovative new market entrants, particularly as prediction markets gain traction and challenge traditional regulatory frameworks.