On Monday, PrizePicks, a US daily fantasy sports operator, made headlines with significant developments. The company announced that Allwyn, an international lottery operator, has acquired a 62.3% stake in PrizePicks for an initial payment of $1.6 billion. This amount could increase by up to $1 billion based on performance incentives over the next three years. The deal suggests a valuation of PrizePicks at $2.5 billion, with potential to rise to $4.15 billion if the performance targets are met.
Additionally, on the same day, PrizePicks received approval for a futures commission merchant (FCM) license from the National Futures Association (NFA). This licensing authority is pivotal, as the NFA processes these licenses on behalf of the Commodity Futures Trading Commission (CFTC). The FCM license will enable the company to expand its presence in the prediction market segment. Performance Predictions II LLC, an entity connected to PrizePicks, was awarded the license, with records indicating it operates under the name 'PrizePicks Predict.'
Holding an FCM license allows PrizePicks to offer prediction market contracts through designated contract markets (DCMs) such as Kalshi and Crypto.com. Its main competitor, Underdog, provides sports contracts in 16 states through a partnership with Crypto.com. Currently, PrizePicks has yet to announce a similar arrangement.
The timing of these developments sheds light on the recent rise in PrizePicks' valuation compared to Underdog's, which stood at $1.2 billion earlier this spring—half of what PrizePicks is now valued at following the Allwyn acquisition. However, Underdog has recently expanded into prediction markets, raising industry speculation regarding the value of CFTC-licensed exchanges.
In July, the offshore prediction market Polymarket acquired QCEX for $112 million, utilizing it to regain access to the US market right after QCEX received its CFTC license. This acquisition serves as one of the few benchmarks for evaluating such market transactions.
According to the release from Allwyn, PrizePicks achieved a 60% revenue increase year-on-year in the year ending June 2025, with an adjusted EBITDA of $339 million. Founded in 2015 by Adam Wexler, PrizePicks will operate as an independent brand under the Allwyn umbrella, with both Wexler and CEO Mike Ybarra remaining involved post-merger.
The move to enter prediction markets underscores the growing appeal of expansion within this sector. Recently, trading volumes for sports prediction markets have surged, particularly with the return of the football season in the US, leading exchanges to process millions of dollars in contracts each week. However, exact revenue from this volume remains challenging to ascertain.
Other companies are also exploring prediction market ventures. FanDuel has formed a prediction market partnership with CME Group, although it currently does not cover sports. Meanwhile, DraftKings is rumored to be exploring various avenues in the prediction market, either independently or via a potential acquisition of the Railbird exchange. Fanatics Betting and Gaming also has a pending application with the NFA.
Despite the excitement surrounding such developments, multiple states, including Nevada, New Jersey, Maryland, and Massachusetts, have initiated legal actions against prediction markets like Kalshi. Several others have issued cease-and-desist orders. Exchanges have had some success contesting these challenges by arguing that federal commodities law takes precedence over state gambling regulations. Ongoing legal disputes could eventually reach the US Supreme Court.
The daily fantasy sports (DFS) landscape is becoming increasingly complex. PrizePicks was instrumental in launching the 'DFS 2.0' wave, allowing users to create 'pick 'em' parlays based on individual player performances. These offerings include two real-money formats: peer-to-peer and against-the-house, with the latter facing scrutiny for potentially bypassing state laws.
The against-the-house model has gained popularity despite its controversial status. Last February, the New York State Gaming Commission fined PrizePicks $15 million for operating without a necessary license, prompting the company to discontinue its real-money against-the-house games in New York. In July, California Attorney General Rob Bonta issued a non-binding opinion categorizing nearly all forms of DFS as illegal, shaking the industry without a clear resolution in sight. In response, PrizePicks recently shifted exclusively to peer-to-peer games, likely as a strategy to alleviate regulatory concerns ahead of its acquisition.
Currently, PrizePicks operates its real-money peer-to-peer game in 35 states, including Washington, DC, as well as non-sports betting states like California, Texas, and Utah. The company also offers free-to-play games in an additional 10 states.
