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DraftKings stock jumped as much as 10% intraday on August 28 after a federal appeals court handed the company an unexpected gift: permission for states to treat prediction markets like gambling.
The Ninth Circuit Court of Appeals ruled that Nevada can enforce its gaming laws against Kalshi’s sports-related event contracts, classifying them as gambling rather than federally regulated swaps under the CFTC. Shares of DraftKings closed the day up 4.29%, settling under $25. That’s still more than 50% below its early 2025 peaks, but the direction mattered more than the altitude.
Why Wall Street liked the ruling
Prediction markets had become a growing headache for traditional sportsbooks. Platforms like Kalshi offered sports-adjacent contracts that operated under federal commodity rules, sidestepping the state-by-state licensing gauntlet that companies like DraftKings and FanDuel spend millions navigating. Lower tax burdens and nationwide reach made these platforms an increasingly attractive alternative for bettors.
Flutter Entertainment, the parent company of FanDuel, stands to benefit from the same dynamic. But DraftKings arguably had more to gain given its own predictions business, which it has been building aggressively over the past year.
DraftKings’ prediction market play
Ironically, DraftKings isn’t just a beneficiary of prediction market regulation. It’s also a participant. The company acquired Railbird Technologies in October 2025 and used that foundation to launch the DKeX exchange in June 2026, powering its own Predictions platform.
That platform now operates in 18 states. For the week ending June 21, 2026, DraftKings reported $11.3 billion in total trading volume across its predictions segment, with annualized consumer volume reaching $3.4 billion.
It’s worth noting that at least one prominent investor anticipated this outcome. Michael Burry, the fund manager best known for his bet against the housing market before the 2008 financial crisis, purchased DraftKings shares in July 2026. His thesis reportedly centered on the expectation that regulatory action would curb the competitive pressure prediction markets were exerting on traditional sportsbooks.
The legal fight isn’t over
The Ninth Circuit ruling is significant, but it’s not the last word. On September 2, a petition was filed with the US Supreme Court out of New Jersey, seeking clarity on where federal authority ends and state gambling regulation begins.
For Kalshi specifically, the stakes are existential. The company built its business model on the premise that its contracts are federally regulated financial instruments, not state-regulated gambling products. If courts keep siding with the state-authority argument, Kalshi would need to fundamentally rethink how it operates, at minimum seeking gaming licenses in every state where it wants to offer sports-related contracts.
DraftKings, by contrast, already holds those licenses. The company’s compliance infrastructure, often cited as a drag on margins compared to lighter-touch prediction platforms, suddenly looks like a strategic asset rather than a cost center.
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