DraftKings Predictions Facing California Lawsuit
Jesse M. Cox Published 07/09/2026
A class action suit in California is challenging the legality of DraftKings Predictions offering its prediction market sports-event contracts. The suit, filed in U.S. District Court for the Central District of California, alleges that DraftKings Predictions event contracts constitute unlicensed sports betting. DraftKings Predictions is available in California, even though legal and regulated sports betting remains banned in the state.
The suit frames the contracts as illegal gambling operating outside of state licensing regulations. It puts into question whether these sites can legally operate in states where sports betting is illegal. It refuses to recognize prediction market event contracts as regulated financial instruments, as they claim to be.
DraftKings Predictions is exploiting a loophole to operate in California
DraftKings launched its prediction market site, DraftKings Predictions, in California in December 2025. This is despite sports betting being illegal in California.
Like other prediction market sites, DraftKings is arguing that event contracts, including sports-event contracts, are derivative swaps, not betting. They call them trades, not bets. And these prediction market sites are under federal regulation by the Commodity Futures Trading Commission (CFTC).
That argument has been successfully defeated in court. States like Michigan and Nevada have won legal decisions forcing prediction market site Kalshi to geofence its sports-event contracts. In those states, courts ruled that sports-event contracts are illegal sports betting.
It's the same case that lawyers will seek to bring in court to put a halt to prediction market sites like DraftKings Predictions in California.
Tribal leaders leading the fight against prediction markets
In California, it's the state's tribes who are leading the charge to stop prediction market sites from offering sports-event contracts in the state. In the Golden State, its tribes control almost all legal gambling.
Tribal leaders are arguing that prediction markets are taking income away from legally operating tribal gambling facilities. Still, they understand the attraction that is drawing these sites to focus on California.
"It's fairly simple," James Siva, Chairman of the California Nations Indian Gaming Association (CNIGA), told California's KYMA.com. "It's the size of the market. California is the golden goose when it comes to gaming."
"Because of that, all of the gaming operators are looking at California as an essential piece of what's going to make them viable as they move forward."
Tribal leaders argue that prediction markets do not add anything of a positive nature to the state. Since they operate entirely online, the sites do not create any jobs in the state. And since they are federally regulated, unlike sports betting, which is state-regulated, there are no benefits to California in terms of tax revenue.
A November 2025 lawsuit filed by several of California’s tribes against prediction market site Kalshi is already ongoing.
“We are pursuing a parallel path forward through litigation and legislation,” said David Bean, chairman of the Indian Gaming Association. “We are preparing to defend our rights and ensure that the law is upheld.”
California voters shut down path to sports betting
The people of California have stated their opinion on whether they want to legalize sports betting. And the answer was an emphatic no.
In 2022, there were two referendums on the election ballot in California that November. Proposition 27 would have allowed online and mobile sports wagering outside tribal lands. The other option, Proposition 26, would have allowed retail sports betting on tribal lands.
Both ballot initiatives suffered resounding defeats. Only 16% of voters supported Proposition 27. Of the ballots cast on Proposition 26, only 30% were in favor of the initiative.