You Thought Kalshi Was Competing With FanDuel. You Might Be Trading Against FanDuel.

Rapid Response / Legal Alert | September 11, 2026

For most of the prediction-market war, the battle lines have looked fairly simple.

On one side are traditional sportsbooks like FanDuel and DraftKings: licensed state by state, taxed as gambling operators, and regulated by state gaming commissions.

On the other are federally regulated prediction markets like Kalshi: exchanges offering event contracts under the Commodity Exchange Act and the oversight of the Commodity Futures Trading Commission.

The two industries have spent much of the past two years looking like competitors fighting over the same sports fan through entirely different legal systems.

That story just became considerably more complicated.

Barron’s reported Friday that FanDuel is acting as a market maker on Kalshi, using the pricing and risk-management expertise developed through its sportsbook business to provide liquidity in certain Kalshi markets. FanDuel parent Flutter reportedly expects its third-party prediction-market market-making activities to generate approximately $50 million in revenue in 2026. The activity is reportedly particularly important in Kalshi’s increasingly popular multi-event “combo” products—the prediction-market cousin of the sportsbook parlay.

So one of the most interesting questions in sports betting right now is no longer merely whether Kalshi can take business from FanDuel.

It is this:

What happens when FanDuel can make money from Kalshi too?

The answer tells us something important about where sports wagering is heading.

Prediction markets and sportsbooks may continue fighting over regulation, licensing, taxes and customers. But beneath that fight, their technology, pricing expertise, liquidity and economics are already beginning to converge.

And that convergence may ultimately matter more than the labels.

The phrase sounds more dramatic than it is.

Market makers are ordinary—and often essential—participants in exchange markets.

An exchange needs buyers and sellers. But there will not always be another customer waiting at exactly the right moment, at exactly the right price, to take the opposite side of every trade.

A market maker helps solve that problem.

It continuously supplies bids and offers, standing ready to transact on either side of the market. In return, it attempts to earn money through spreads, pricing advantages, incentives or sophisticated management of its overall risk.

Kalshi expressly operates a market-maker program. Approved market makers agree to provide consistent two-sided liquidity and may receive benefits such as reduced fees or adjusted position limits if they satisfy specified quoting and volume obligations. Kalshi says applicants are reviewed for matters including financial resources, trading experience and business reputation.

None of that is unusual for an exchange.

The CFTC itself routinely receives filings establishing or modifying market-maker and liquidity-incentive programs across federally regulated derivatives exchanges. Kalshi has likewise filed liquidity programs with the Commission.

So the important point should be made clearly:

The mere presence of a professional market maker does not somehow make Kalshi a sportsbook.

It makes Kalshi look, in one important respect, like an exchange.

But that does not mean FanDuel’s involvement is insignificant.

Quite the opposite.

Prediction markets are frequently described as fundamentally different from sportsbooks because users trade contracts with one another rather than betting against “the house.”

That description is directionally correct.

It is also easy to misunderstand.

A retail customer buying an NFL event contract on an exchange need not be matched with another retail customer sitting at home who happens to hold the opposite view.

The counterparty can be a sophisticated professional liquidity provider.

And according to Friday’s report, one of those sophisticated participants is FanDuel.

That distinction matters.

Suppose a customer buys a contract based on whether an NFL team will win, or purchases a multi-event product combining several outcomes.

Economically, the customer may experience something that feels extraordinarily similar to sports betting.

The proposition concerns sports. The price reflects probability. The customer risks money on the outcome. And, at least in some transactions, the party taking the opposite economic exposure may possess the same kind of models, traders and pricing infrastructure used by one of the country's largest sportsbooks.

Legally, however, the structures remain quite different.

That difference is at the center of the entire prediction-market controversy.

Kalshi has been designated by the CFTC as a designated contract market, or DCM, since 2020. A DCM operates under the Commodity Exchange Act and a federal regulatory regime governing exchanges, trading practices, market surveillance and other requirements.

That legal structure is central to Kalshi’s position that state gambling regulators cannot simply treat its sports contracts as ordinary sportsbook wagers.

The Third Circuit recently accepted that argument at the preliminary-injunction stage in KalshiEX LLC v. Flaherty. The court concluded that Kalshi had demonstrated a likelihood of success on its argument that the Commodity Exchange Act gives the CFTC exclusive jurisdiction over sports-related event contracts traded on a federally designated contract market and therefore preempts conflicting state gambling regulation.

The CFTC itself has taken the same institutional position in litigation against states attempting to regulate federally registered prediction markets.

FanDuel’s market-making activity does not necessarily change any of that.

The legal distinction between an exchange and a sportsbook does not depend on whether every counterparty is an ordinary consumer.

Financial exchanges routinely rely on institutional market makers.

Indeed, the ability of professional firms to provide liquidity is often part of what makes an exchange function efficiently.

That is why the simplistic argument—

“FanDuel is on the other side, therefore Kalshi must really be a sportsbook”

—is not particularly persuasive standing alone.

But regulators challenging prediction markets may still find the disclosure useful for a different reason.

State gaming regulators have consistently argued that sports prediction markets are functionally offering sports wagering while avoiding the licensing, taxes and consumer-protection requirements imposed on sportsbooks.

Kalshi responds that federal law regulates the contracts as derivatives traded on a federally designated exchange.

That dispute ultimately turns on statutes, preemption and regulatory authority—not rhetoric.

But facts can influence how those legal arguments are perceived.

And this is a powerful fact:

The same company that accepts regulated sports bets through one business can apparently use substantially similar pricing expertise to take economic positions against sports-event traders through another.

That does not prove the products are legally identical.

It does illustrate how economically close they can become.

A state attorney general or gaming commission can now ask a fairly intuitive question:

If FanDuel analyzes the probability of an NFL outcome, prices that risk and earns money by taking the opposite economic position from customers, why should one transaction be gambling simply because it occurs through FanDuel's sportsbook while another becomes federally regulated derivatives trading because the transaction clears through an exchange?

There are legal answers to that question.

But it is no longer an absurd question.

That distinction—between economic similarity and legal classification—may become one of the central themes in the next phase of prediction-market litigation.

There is another side to this story that has very little to do with legal doctrine.

From FanDuel's perspective, market making may simply be rational business strategy.

Prediction markets pose a potentially serious competitive threat to conventional sportsbooks because federally regulated platforms may reach customers in jurisdictions where traditional sports wagering remains unavailable or heavily restricted.

That creates an uncomfortable possibility for incumbent sportsbooks.

They can spend enormous sums fighting the prediction-market model.

Or they can figure out how to make money from it too.

FanDuel already possesses precisely the infrastructure prediction markets need:

Those capabilities are valuable whether the product is called a bet or an event contract.

If FanDuel can sell that expertise into the prediction-market ecosystem, the competitive threat becomes partially monetizable.

The economics begin to look less like sportsbook versus prediction market and more like a company participating at multiple layers of the sports-risk market.

That may be strategically important for the entire industry.

The winners in the prediction-market boom may not necessarily be the companies that pick one regulatory model and defend it forever.

They may be the companies that can operate—or monetize their capabilities—across several models at once.

FanDuel’s reported role is especially interesting because Barron’s says its market-making expertise has been useful in Kalshi’s fast-growing combo markets.

Combos package several outcomes into one position.

That sounds familiar because sportsbooks have spent years perfecting essentially the same consumer proposition through parlays and same-game parlays.

The pricing challenge becomes much more complicated when several outcomes are combined.

Imagine a product involving:

Those events may be correlated.

A sophisticated operator cannot simply multiply several standalone probabilities and hope for the best. It must model how the outcomes interact, continuously update the price and manage the resulting exposure.

Sportsbooks have invested heavily in doing exactly that.

Prediction markets now need the same expertise.

That helps explain why FanDuel is valuable.

It also reveals something larger:

As prediction-market products become more sportsbook-like in complexity, they naturally begin demanding sportsbook-like infrastructure.

The regulatory systems may remain different.

The underlying quantitative problem does not.

There is an easy but unhelpful way to frame all of this:

Professional market makers versus unsuspecting retail traders.

That goes too far.

Professional market makers can improve a market.

They provide liquidity, narrow spreads, make it easier to enter and exit positions and help prevent thin markets from producing erratic pricing.

Without sufficient liquidity, many prediction markets would simply be worse products.

The better consumer question is therefore not whether professional firms should participate.

It is whether customers understand the market they are entering.

A phrase like “peer-to-peer” may suggest a marketplace populated principally by people expressing opposing views about an event.

Modern exchange markets are more complicated.

Retail users may transact against professional firms employing substantially greater capital, technology, information-processing capability and pricing sophistication.

Again, that is not inherently improper. It is common throughout financial markets.

But prediction markets occupy an unusual space because they increasingly market products to ordinary sports fans rather than institutional derivatives traders.

That creates a disclosure and regulatory-design problem.

A sports fan who understands that he is placing a wager against a sportsbook knows the sportsbook is sophisticated and expects the sportsbook to have built a margin into the price.

Does the same consumer understand what it means to trade a sports contract on an exchange where the counterparty may be a professional market-making operation?

That question becomes more important as exchanges offer increasingly complex products.

There is another layer that deserves attention.

FanDuel operates inside heavily regulated state gaming systems.

Its prediction-market activities therefore create potential compliance issues extending beyond Kalshi's obligations as an exchange.

Different states may ask whether and how a licensed sportsbook may participate financially in markets that those same states contend constitute unlawful gambling.

That could create awkward regulatory dynamics.

A company might be licensed by a state to conduct sportsbook wagering under one legal regime while generating revenue through transactions occurring on a federally regulated platform that the state is simultaneously trying to prohibit.

That does not necessarily mean FanDuel is violating state law. The answer would depend on the specific activity, corporate structure, jurisdiction, licensing conditions and ultimately the success or failure of the broader federal-preemption arguments.

But it creates the sort of issue regulators notice.

Gaming licenses typically come with broad suitability, disclosure and regulatory-compliance obligations. If federally regulated prediction markets continue expanding while state regulators continue challenging them, sportsbook participation on those platforms could force companies to navigate two regulatory systems that may disagree about the legality of the underlying product.

That is a much harder compliance problem than simply choosing whether to launch another sportsbook.

For now, prediction markets and sportsbooks remain legally distinct businesses operating under very different regulatory architectures.

That distinction should not be casually erased.

But markets often converge economically before the law catches up conceptually.

That appears to be happening here.

Prediction exchanges are adopting products that resemble parlays.

Sportsbook pricing technology is helping provide liquidity to those products.

Financial-market terminology increasingly describes activity that feels familiar to sports bettors.

Traditional gaming companies are learning how to monetize federally regulated exchanges while simultaneously competing with them for customers.

And regulators are fighting over whether the legal distinction between those systems should matter more than their growing functional similarities.

The prediction-market war therefore may not end with one side defeating the other.

Something more interesting may happen.

They may start becoming pieces of the same industry.

If so, Friday's FanDuel disclosure will look less like an odd commercial arrangement and more like an early glimpse of the market that eventually emerged.

Because the most revealing thing about FanDuel reportedly making markets on Kalshi is not that a sportsbook found its way onto a prediction exchange.

It is that, apparently, the sportsbook's expertise fits there remarkably well.