Prediction markets pose a rapidly growing threat to the regulated gambling industry, and though some believe that threat is overplayed, the two biggest sports betting operators in the US have not hung around to find out.
FanDuel and DraftKings both quit the American Gaming Association overnight, citing misalignment in 'certain areas.'
Understatement? That misalignment was around prediction markets, and it was profound.
But who really pushed who and who loses the most from this parting? We spoke to each party to try and figure it out.
Who said what?
Everyone has held their cards fairly close to their chest and kept perfectly civil.
In fact, it has been clear for a long while that FanDuel and DraftKings, by courting a prediction market entry, were diametrically opposed to the lobby of the AGA, the remit of which is to protect the regulated market.
Now that both companies are in the final stages of preparing to launch their prediction products, that relationship was untenable.
However, despite the AGA being extremely vocal opponents of prediction markets, a spokesperson from the association told Global Gaming Insider that the decision to part ways was taken by the operators themselves: "In discussion with DraftKings and FanDuel, the AGA has accepted their request to relinquish their membership, effective immediately. We wish them the best, and we expect to maintain close ties in our mission to promote and protect legal, regulated gaming."
It is notable that the request apparently came from the operators' side, principally because it's easy to imagine that they would have soon been pushed had they not jumped.
But while FanDuel and DraftKings' bet could pay off for them, the loss of the pair from the AGA table does nothing good for the trade body - so that push may have been a reluctant one.
With that in mind, it likely benefits both to have the parting seem as civil as possible, even if it wasn't.
If the AGA still hope to make use of FanDuel and DraftKings to "promote legal, regulated gambling," allowing the pair to modestly hand in their badges may have been a necessary aspect of the break.
A FanDuel spokesperson gave us the following statement: "FanDuel has built our business by maintaining strong industry partnerships. We value the spirit of collaboration that comes with these relationships. But as we expand into prediction markets, we recognize this direction is not aligned with the American Gaming Association's current priorities for its member operators. After thoughtful consideration, we have decided to step back from our AGA membership at this time."
DraftKings' responded to our request for comment with a more abrupt statement, telling us: "As the company's business strategy evolves - including with prediction markets - DraftKings determined that its plans no longer fully align with the AGA's direction in certain areas and have decided to relinquish its membership."
Competitive necessity
The pace at which Kalshi and Polymarket have been scaling has put a new kind of pressure on the two sports betting giants.
They could scarcely afford to wait for more regulatory and legal certainty around predictions if they wanted to maintain their market positions.
Whether they would have been overhauled culturally and in market share had they kept out of it, it's hard to know for sure. The movement was undoubtedly in that direction, with the unknown factor being prediction markets' ceiling.
Momentum had, however, already taken them past plenty of FanDuel and DraftKings' erstwhile competitors in terms of trading volume - the dissolution of ESPN Bet last week was perhaps accelerated by being left in prediction markets' dust.
Operators like Penn were realistically in no position to jump on the bandwagon by that point. Largely because jumping on the bandwagon is a very time-sensitive maneuver.
For FanDuel and DraftKings, they still now have that opportunity. For as long as they remain unequivocally the biggest players in sports betting (including sports event contracts), it is eminently possible that they can challenge prediction markets at their own game while maintaining their position in the regulated market.
Disruption
FanDuel and DraftKings were disruptors themselves once.
As FanDuel reminded us in its statement to Global Gaming Insider today: "FanDuel has always been the company that moves quickly, from daily fantasy to mobile sports betting to prediction markets. We build what consumers want and we operate with an unwavering commitment to integrity."
When the AGA was formed in 1994, its charge was to represent the industry as it was: the casinos.
Daily fantasy sports, as with prediction markets, walked the line of innovation and intrusion within that existing framework.
Over time, PASPA was repealed, FanDuel was acquired and both brands joined with the AGA for its responsible gambling campaigns.
That acceptance into the mainstream is now what they are afraid of. They've seen it happen before with them, and if it is to eventually happen with prediction markets, they know they need to be on the inside of it.
To give up that explicit acceptance by the gambling regulators is a bold move, but failing to take that risk could have ended being another, far more costly, risk. Already they and others have been punished in the markets for standing still.
Will Martin, CEO of LiveDuel, told Global Gaming Insider that the move was a 'pivot or perish' moment.
In Nevada, the two companies have already given up their licenses, and perhaps we'll see more situations like that yet - a clear risk.
But neglecting the opportunity to enter huge markets like California and Texas leaves them gambling with the prospect of what Martin describes as: "dying on the vine."
Bill Miller, President and CEO of the AGA, called the partnership of the NHL with Kalshi and Polymarket: "deeply troubling"
