California Sports Betting Hopes Are Plummeting

The future of California sports betting just encountered a major twist. And it’s the type of curveball that could mean The Golden State will not be legalizing sports wagering anytime soon.

DraftKings and FanDuel have officially decided to launch sports prediction markets in states that have yet to legalize betting. This will, as it turns out, include California. Many initially expected them to sit out both The Golden State and Texas markets. The thought process here is that embracing an alternative to traditional gambling would hurt the operators’ chances of working in the state if and when California sports betting gets legalized.

Publicizing their collaborative efforts with tribes in The Golden State lent merit to this theory. DraftKings and FanDuel, among others, clearly want to be part of what could be the biggest sports gambling market in the country. Linking up with tribal leaders and hiring people with good working relationships to them is seen as a level of acceptance that online sportsbooks in the United States are perfectly fine ceding the gambling lead while entering the market as operational partners.

Well, it doesn’t look like that’s the case anymore. FanDuel and DraftKings have officially left the lobbyist group railing against prediction markets on behalf of sportsbooks and other stakeholders. This is a surefire sign they’ll be leaning into the prediction-market game themselves. And it’s a harbinger that comes on the heels of California essentially classifying prediction markets as illegal sports betting.

Explaining the Drama Over Sports Prediction Markets in the United States

For anyone not familiar with prediction markets, the companies who offer them—Kalshi, Polymark, and soon, DraftKings and FanDuel, among others—refer to them as event-based contracts. Customers “invest” in a yes-or-no outcome of a given competition. So, for instance, “Will the Los Angeles Lakers win the 2026 NBA title?” would be an example of an investment users could make.

Now, because the returns on these transactions are not rooted purely in bookmaking, companies believe they are actually trades. It’s almost like stocks. The payout on an event-based contract is determined almost primarily by other traders, rather than the operators themselves.

In this case, then, prediction-market operators are regulated by the federal government. Their transactions, in their belief, do not pit a customer against “The House.” Users are trying their hand, effectively, as a sports-event-outcome stock.

This interpretation is not accurate in the eyes of everyone. Many believe prediction markets is a form of online sports betting in the United States that violates most state constitutions. Lawmakers galore have spoken out against them. Many are even trying to take action.

Attempts to shudder prediction markets in the USA are so far proving unsuccessful. Various litigations are pending, but companies providing these event-based contracts have yet to be fully extricated from any specific state.

FanDuel and DraftKings Just Signaled a Major Change in the California Sports Betting Outlook

That brings us to the current case of DraftKings and FanDuel. Like many other online sports betting operators, they initially saw prediction markets as an existential threat to their business model. The idea, specifically, that they couldn’t offer California sports betting but a company like Kalshi could provide prediction-market contracts to Californians was never going to sit right.

Fighting against the growing wave of predictions markets initially appeared to be the obvious call. Now, though, DraftKings and FanDuel are joining the fold. And while they say they won’t offer prediction markets in states where they provide sports betting, this is still a crucial pivot.

Offering prediction markets in California is not going to sit right with tribal nations. Most support the state’s view of these transactions. They believe prediction markets are sports betting dressed in circumvention language. It stands to reason that any positive relationship they have built with FanDuel and DraftKings will now fall by the wayside.

To what extent this impacts the likelihood of California sports betting getting legalized is unclear. It could have a number of different effects.

Tribal nations could keep applying pressure on the state to ban prediction markets. They could also attempt to accelerate their own sports betting plans. By pushing for a bill getting on the electoral ballot in November 2026, they could feasibly launch their own operations before the end of 2027.

This Seems Like a Major Blow for California Tribal Nations

Rest assured, no matter which direction California tribal nations take, it probably won’t include collaboration with online sportsbooks. It feels like that ship has sailed.

This could give the appearance of a victory for tribal nations if they successfully advocate for a California sports betting model that doesn’t feature prominent online operators. However, at that point, it would not be much of a loss for the FanDuels and Draft Kingses of the world. Heck, they will have already cracked the California sports market with their event-based contracts.

To that end, it is the tribes who will be working to play catch-up if sports prediction markets launch in the state. Offering on-site only sports betting will not adequately rival online sports prediction markets from gambling behemoths like FanDuel and DraftKings. Their reach and resources border on an industry monopoly.

Tribal nations may, in turn, find it hard to build up their own California online sports betting business with prediction markets in the fold. They won’t just be going up against bigger competitors offering event-based contracts. They could actually have a harder time finding operational partners to run sites that also guarantee a meaningful reach and resonation. Look no further than ESPN abandoning its partnership with Penn Entertainment, ditching the ESPN Bet-branded sportsbook, and signing a partnership with DraftKings.

Really, the only way tribal nations can come out on top here is if California proves able to ban prediction markets. And if what’s happening elsewhere is any indication, this is a pretty tall order.

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