DraftKings and FanDuel Out of AGA

DraftKings and FanDuel are arguably two of the most powerful voices in the U.S. online gambling market. It's very meaningful that both companies have announced that they are breaking their connection with the American Gaming Association (AGA). The break comes amid a disagreement over the inclusion of "prediction market" in the future.

Prediction market betting is a wagering option that allows bettors to wager on the outcome of big events such as the Oscars, elections, or where the Dow Industrial might end up by year-end. In the opinion of the powers to be at DraftKings and FanDuel, the inclusion of access to this betting market is essential to the future of sports betting. FanDuel is going as far as to launch "FanDuel Predicts" in partnership with CME Group. The objective of this partnership is to offer betting access to prediction markets in all states, including states that have not yet legalized online sports betting. As one might guess, the AGA and other member operators feel differently.

The Line is Drawn in the Sand

The AGA has made clear that they intend to move to ban any operator from the group should they decide to offer access to prediction-market products. They argue that offering said products would draw scrutiny, appearing to bypass the laws and oversight that are typically used by state regulators to regulate sports gambling. They also cite concerns over outcome manipulation, weak consumer protections, and the possibility of money laundering and tax avoidance.

As proponents of prediction market wagering, DraftKings and FanDuel both believe this is what consumers want. Both companies feel the market needs to stay attuned to what the bettors are seeking. They also feel regulating such activities would be no different than trying to regulate wagering on sports events like the Super Bowl or World Series.

The Potential Fallout for the ACA

Upon receiving notification of their departures from the AGA, the AGA directorship wished DraftKings and FanDuel well in the future. It's not clear if the well-wishing is sincere, given that the loss for the group of two online gambling behemoths will lessen the AGA's influence over the nation's online gambling industry.

Of course, this decision will also negatively impact DraftKings and FanDuel. Both companies will lose a voice when it comes to trying to influence the direction of the U.S. online gambling market in the future. That means they won't have a voice when it comes to issues like:

• Setting policy positions


• Setting gaming standards and practices


• Influencing regulatory practices

The exit from the AGA could also adversely affect relationships with state and federal regulators, and make both companies subject to more scrutiny. It's worth noting that states like New York are already considering legislation that would ban the offering of prediction market wagering.

To date, taking this position on prediction markets has not had an effect on business at DraftKings and FanDuel. Both companies still rank at the top of the industry as leading sports betting operators. When a company stands as a big dog in an industry, it's hard to get them off their perch.