Sportsbooks go all in-on prediction markets

The prediction markets battle is unfolding on multiple fronts as sportsbooks, trading platforms and regulators test the boundaries of U.S. betting law.Why it matters: DraftKings, one of the nation's largest sportsbooks, launched its long-anticipated prediction market Friday, embracing a fast-growing alternative to traditional online gambling.State of play: The prediction market surge is unfolding across three competitive fronts:Dedicated standalone services: Polymarket and Kalshi pioneered the space and have been the most aggressive, offering markets such as sports and politics that have irked state regulators.App integration: Robinhood is offering event contracts through its app via a partnership with Kalshi, while crypto exchange Coinbase is poised to provide prediction markets soon.Sportsbook and fantasy sports apps: DraftKings Predictions, a separate app from DraftKings Sportsbook, went live Friday in 38 states. It comes about two weeks after rival sportsbook Fanatics entered the space with its own prediction market app, Fanatics Markets. Underdog Sports and PrizePicks have also moved into the space.The intrigue: Unlike Kalshi, for example, DraftKings Predictions won't provide access to sports contracts in every market where it's operating.DraftKings Predictions also won't be available at all in Washington, Montana, Arizona, Nevada, Iowa, Illinois, Arkansas, Tennessee, Ohio, Pennsylvania, New Hampshire and Maine.DraftKings chief product officer Corey Gottlieb tells Axios the decision on each individual state stems from the company's conversations with officials there: "A lot of it is rooted in the fluidity of states and regulators forming their perspective on the space."Friction point: Prediction markets are engaged in conflict with land-based casinos, which have argued prediction markets are unlawful.DraftKings, Fanatics and FanDuel, whose own prediction market service is imminent, recently left the American Gaming Association over the topic.The AGA, whose members include casino chains MGM and Caesars, has launched a campaign against prediction markets.Meanwhile, there's tension between the dedicated prediction markets and the sportsbooks after Polymarket CEO Shayne Coplan said at Axios BFD in November that traditional sportsbooks are a "scam."What we're watching: The integration of prediction market services into other sites and apps."Prediction markets can, in theory, integrate into almost any website or app," according to gambling industry consultant Dustin Gouker.They "will increasingly be found where you already have money," he adds. "In that world, the friction of depositing and placing a bet is lowered substantially. That dynamic alone can siphon activity from sportsbooks, just by the nature of how ubiquitous the access to sports event contracts can become."