DraftKings (NASDAQ:DKNG) is positioning prediction markets as a major growth opportunity while maintaining that its core online sports betting and iGaming businesses remain strong, according to comments made during a fireside discussion hosted by MoffettNathanson analyst Robert Fishman.
The DraftKings speaker, identified during the conversation as Alan, said the company’s experience operating across daily fantasy sports, sports betting, iGaming and other products has prepared it for a more complex regulatory and competitive environment in prediction markets.
“The core is fantastic,” Alan said, adding that prediction markets represent “a huge opportunity” that aligns closely with DraftKings’ existing sports betting strengths. He described the category as “the next evolution of DraftKings.”
Prediction Markets Seen as Expansion Opportunity
Alan said DraftKings expects to benefit from its existing customer relationships, media partnerships and technology infrastructure as it expands its DraftKings Predictions offering. He said many customers interested in prediction markets share similar engagement patterns with users of sports betting, iGaming, fantasy, lottery and Pick6 products.
He also said the company’s national advertising could become more efficient as DraftKings offers a product that can reach customers in states where traditional online sports betting is not available. In California, for example, Alan said consumers who previously saw DraftKings advertising but could not use its sportsbook may now see a relevant product through prediction markets.
DraftKings has previously communicated an expected $200 million to $300 million EBITDA impact in 2026 from prediction market investment, Alan said. He added that the company will follow customer acquisition and lifetime value data when determining future spending levels.
“Maybe we spend less, maybe we spend more, but we will follow the data,” he said.
Alan said DraftKings plans to lean into marketing around the World Cup and expects to have a “best-in-class product” ready in time for the NFL season. He also pointed to the company’s launch of Combos and its acquisition of Railbird Exchange, saying DraftKings is integrating Railbird’s designated contract market and expects to launch related capabilities in the coming weeks.
Regulation and State Tax Discussions Remain Key Issues
Asked about the regulatory backdrop, Alan said the industry needs “a clear, concise, well-articulated set of the rules of the road.” He said DraftKings is encouraged that the Commodity Futures Trading Commission is engaging in dialogue and rulemaking, and noted that the company has submitted recommendations for rule changes.
Alan also said prediction markets have changed the conversation with states considering higher taxes on sports betting operators. He said states are now weighing the competitive impact of federally regulated products that are not taxed in the same way as state-regulated sports betting.
He said DraftKings’ government affairs team is working to educate states about the potential consequences of raising taxes too aggressively, including the risk of pushing activity toward unregulated markets or limiting industry growth.
Core Sportsbook Business Still Growing
Turning to the core business, Alan said DraftKings’ sportsbook revenue grew 24% year over year in the first quarter and that April showed a reacceleration in handle. He cautioned, however, that handle alone does not tell the full story because product mix is shifting toward higher-margin betting formats such as parlays.
Alan said DraftKings focuses on gross profit per customer and pointed to annual customer cohorts that have continued to generate more gross profit over time. He said customers acquired in earlier years remain engaged and are producing more gross profit as the company expands products, improves engagement and optimizes promotional spending.
On competition, Alan characterized the online sports betting market as “largely a very rational competitive environment,” though he said promotional intensity can ebb and flow around major events. He said DraftKings will rely on its own data rather than competitor behavior to determine marketing and promotional levels.
Media partnerships were also highlighted as a major part of DraftKings’ strategy. Alan cited relationships with ESPN, NBC and Amazon and said national advertising is becoming more valuable now that the company can promote sportsbook products in legal states and prediction products where available through a single app.
iGaming Growth and Legalization Remain in Focus
Alan described DraftKings’ iGaming business as strong, profitable and still underpenetrated in existing legal states. He acknowledged a first-quarter slowdown but said some of the softness may have been tied to sports engagement in specific states, particularly where local teams had different levels of playoff success compared with the prior year.
He said DraftKings has brought in Christian Bogstrand to lead its iGaming business and is increasing its focus on slots-first customers rather than primarily sports-centric users. Alan also referenced new product rollouts, including Flex Spins and additional products expected over the next four to six weeks.
On iGaming legalization, Alan said there is momentum, with Maine “on the horizon” and several other states discussing bills. He said states are increasingly considering legalization as they face budget pressures and as sweepstakes and offshore operators capture dollars without generating tax revenue or operating under state regulation.
Capital Allocation and Investor Perception
Asked about mergers and acquisitions, Alan said DraftKings’ top capital allocation priority is investing in its U.S. and Canada core businesses, including sportsbook, casino and prediction markets. He said the company will remain diligent with capital spending and will evaluate opportunities without allowing M&A to distract from its primary growth initiatives.
Regarding share repurchases, Alan said DraftKings intends to leave itself room to be opportunistic.
As the discussion closed, Alan said he believes investors may not fully appreciate how DraftKings’ technology and data advantages could translate into prediction markets. He argued that the overlap between DraftKings’ existing sportsbook capabilities and prediction market products gives the company a differentiated position as the category develops.
About DraftKings (NASDAQ:DKNG)
DraftKings Inc is a leading digital sports entertainment and gaming company specializing in daily fantasy sports, sports betting and iGaming products. The company provides an integrated platform where users can participate in daily fantasy contests, place wagers on professional sports events, and enjoy a range of online casino-style games. DraftKings' proprietary technology supports real-time odds, live scoring and advanced analytics to enhance the user experience across mobile and desktop applications.
Founded in 2012 by co-founders Jason Robins, Matthew Kalish and Paul Liberman, DraftKings began as a daily fantasy sports provider and rapidly expanded into regulated sports betting following legislative changes in the United States.
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The article "DraftKings Eyes Prediction Markets as ‘Next Evolution’ as Sportsbook Growth Holds Strong" first appeared on MarketBeat.
