Best Smidcap Ideas: Strengthening Core Fuels Asymmetric Predictions Upside

Research evidence excerpt

Best Smidcap Ideas: Strengthening Core Fuels Asymmetric Predictions Upside

TD Cowen DraftKings

Global Research June 8, 2026

DraftKings acquired Railbird Technologies ("Railbird") and its subsidiary Railbird Exchange (a

CFTC-designated exchange) in October 2025 for $250 million (only $50 million was actually

paid at close with the rest contingent on scaling the business) to accelerate its entry into

regulated event contracts, allowing DraftKings to participate deeper in the prediction markets

value chain, rather than simply adding a third-party product to the app. By owning the

exchange vs. partnering with an exchange (i.e., Fanduel and CME partnership), DraftKings has

created a clearer path to influence market structure and liquidity, participate in market making,

and capture more of the economics if the category scales. The opportunity remains early, and

regulatory uncertainty is real, but DraftKings’ approach gives it a more vertically integrated path

than a distribution-only model, in our opinion.

A further point that is easy to miss is that prediction markets are not limited to sports. Sports

may be the most natural entry point for DraftKings given its customer base and product DNA,

but Predictions can extend into politics, economic outcomes, financial markets, entertainment,

culture, weather, and other real-world events. The long-term opportunity is therefore not

simply a substitute for OSB in states such as California or Texas, but a broader event-trading

marketplace that can expand the number of use cases, trading moments, and customer

cohorts inside the DraftKings ecosystem. Sports will be the anchor, in our view, but will not be

the ceiling. Successful execution in sports could allow DraftKings to build liquidity, trust, and