Analyst: New Jersey trial a win-win for DraftKings, FanDuel

David McKee

12 September 2025 at 11:44am UTC-4

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Whatever the outcome of a trial in New Jersey, its result favors both DraftKings and FanDuel parent Flutter Entertainment, Jefferies Equity Research analyst David Katz concluded in an investor note published September 11.

At issue in the Garden State courts is whether Kalshi could continue to offer sports wagers. Katz wrote, “press reports and our industry sources suggest that Kalshi appeared to fare more positively, albeit not from all perspectives.” He added that any continuation of the status quo favored Kalshi.

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In oral arguments, Kalshi contended that its self-proclaimed “odds” and “bets” are in fact financial swaps. State regulators argued otherwise, classifying them as sports bets and therefore subject to New Jersey regulations.

“On this point, judges appeared sympathetic to Kalshi’s argument that federal law and [Commodity Futures Trading Commission] regulation of these contracts supersede state law,” Katz recapped. He noted that the panel of judges were not persuaded, it appeared, by the state’s contention that giving Kalshi a pass would void state gaming laws and invalidate sports betting licenses already issued, since they were not Commodity Futures Trading Commission regulated.

Katz believed the case boiled down to what the definition of a financial swap might be, “as Kalshi claims its sports contracts are financial in nature and have commercial consequence.” Judges, he said, were skeptical of Kalshi’s claim that prop bets met this definition, while finding that sports wagering could fall under the broadly drawn legal definition of a swap.

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New Jersey may have scored one, subsidiary victory: “Kalshi’s legal team appeared to concede that certain player prop bets potentially do not meet the commercial consequence definition.”

However, the burden of proof was said to rest with New Jersey. The state is appealing a preliminary injunction in Kalshi’s favor, one that allowed it to continue taking sports wagers. Garden State regulators must prove that the basis for said injunction was invalid.

Trenton’s lawyers “attempted to shift the framing of the case to de novo, which would begin a new case that would not consider the lower court’s ruling.” Katz did not think the court tipped its hand as to whether this was a valid strategy or not.

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Katz’s conclusion was that the court was leaning, for the most part, in Kalshi’s direction: “The court appeared sympathetic to its argument that the law as written indicates that sports events could be considered commercially consequential and therefore swaps. However, commentary also suggests the court could put significant guardrails around what constitutes a swap, therefore limiting the scope of Kalshi’s offerings, notably on player props.”

The worst case for FanDuel and DraftKings, Katz continued, would be ongoing uncertainty. Therefore, any resolution in court would be a positive for their stocks.

A level playing field, he explained, favored incumbent sports betting providers over “disruptors” such as Kalshi. The former has the infrastructure, as well as the scale of operation, needed to prevail, whether in customer cultivation, product development or efficiency of marketing.

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To further explore the issue, Jefferies is convening a September 15 webinar with gaming-law expert Daniel Wallach, who will expound on the ramifications of prediction markets for gaming.