The Massachusetts gambling regulator informed all betting licensees about the prohibition of prediction market sports contracts. FanDuel and DraftKings received this warning shot. The Massachusetts Gaming Commission sent a letter to sports betting licensees on 13 November yesterday. Some licensees partnered with entities in the prediction market space to offer sports contracts. FanDuel and DraftKings lead the sports betting market currently. Both companies indicated plans to enter this space recently. FanDuel chose a JV deal with CME for expansion. DraftKings acquired Railbird to achieve similar goals.

The Commission warned businesses about offering sports contracts to Massachusetts residents. Steps include possible revocation of gaming licences for violations. Regulators wrote additional warnings in their letter. Other regulators’ actions against licences due to prediction market operations may affect Massachusetts’ suitability decisions. FanDuel exited Nevada following this news recently. DraftKings pulled its pending application to enter that market, too. Nevada regulators expressed concerns about their entrance into the prediction markets space.

Market Reacts to FanDuel Prediction Market Worries

The market showed signs of concern about FanDuel’s move into prediction markets. The risk of being left behind also worried investors. Flutter, FanDuel’s parent company, saw its share price fall by over 16% from 12 November. DraftKings’ valuation dropped nearly 6% yesterday as well. Markets digested what these companies’ plans meant for the American sports betting future. Macquarie analysts called the share price decline “overdone” in yesterday’s published note. Chad Benyon serves as a Macquarie senior analyst currently. He wrote about three key points in the analysis.

No impact signs appeared in US states with legalised sports betting during 3Q. FanDuel Predicts launches in December through a CME Group partnership. The untapped population in unregulated states becomes instantly accessible. Management can use Betfair Exchange experience within the Flutter Group. Prediction products won’t compete with sportsbooks due to inferior parlay and in-play products. FanDuel appears comfortable not launching a prediction markets app in risky states. The company believes the main opportunity exists in pre-regulation states. Peter Jackson holds the position of Flutter CEO. He explained their launch strategy development process.

Close consultation with state regulators and tribal authorities shaped the strategy. A state-specific approach resulted from this tailored planning. Launch becomes possible in states where no local regulation exists. Massachusetts regulators asked licensees to respond within 10 working days. They must explain how they intend to comply with the note.