DraftKings said its push into sports prediction markets is exceeding expectations, with executives arguing the emerging business is expanding the company's customer base rather than cannibalizing its sportsbook as operators prepare for what is expected to be an increasingly competitive NFL season.
- DraftKings said prediction markets are accelerating growth as more than 600,000 customers have used its offering this year, with executives calling the business a major long-term growth driver ahead of the NFL season.
- The company argued prediction markets are expanding, not replacing, its sportsbook business, citing roughly 1% customer overlap with the leading prediction market operator and estimating most prediction-market volume comes from professional traders.
- Management reaffirmed full-year guidance despite heavier investment in predictions, saying its vertically integrated exchange, brokerage, and market-making strategy positions DraftKings to compete for leadership in the emerging market.
The company used its second-quarter earnings call Friday to frame prediction markets as the next major growth pillar alongside sportsbook and iGaming. Its newly launched offering is generating faster-than-expected customer growth while maintaining its broader financial outlook despite increased investment.
"We had a fantastic second quarter," DraftKings CEO and co-founder Jason Robins said. "Our core business continues to grow and is generating significant free cash flow, and our newly launched predictions offering is growing faster than we anticipated."
Prediction market strategy
That early momentum is reinforcing DraftKings' long-term strategy of building what executives describe as a "super app" that combines sportsbook, fantasy sports, iGaming, and prediction markets under one platform. Robins said the strategy has helped attract significant numbers of customers in states where traditional online sportsbooks remain illegal while positioning the company for further growth during the upcoming NFL season.
The comments come as publicly traded gaming operators increasingly embrace prediction markets despite an unsettled legal landscape. During the latest earnings season, Flutter Entertainment reiterated that prediction markets complement rather than replace sportsbooks, Rush Street Interactive said it intends to maintain a flexible approach as the market develops and PENN Entertainment warned the 2026 NFL season could become a customer acquisition "arms race" as operators compete for users across both regulated sportsbooks and federally regulated event contracts.
DraftKings is taking perhaps the industry's most aggressive approach.
The company reported customer acquisition rose nearly 75% year over year during the second quarter, while sports consumer volume, which combines sportsbook handle and prediction market activity, increased 15%. Executives said stronger-than-expected customer acquisition prompted the company to increase marketing investment during the quarter because acquisition costs remained well below expectations.
Unlike several competitors that have largely characterized prediction markets as a defensive initiative, DraftKings argued the business is additive.
"Our data is also confirming that there is no discernible impact from prediction markets on our sportsbook revenue," Robins said. "We continue to see only about 1% customer overlap between our sportsbook and the largest prediction market operator in sportsbook states."
Management went further, estimating that roughly 80% to 90% of prediction market volume in states with legal sportsbooks comes from professional betting syndicates and institutional traders rather than traditional sportsbook customers. If accurate, the company believes prediction markets represent incremental demand instead of shifting wagers away from sportsbooks.
That conclusion stands in contrast to concerns raised by some regulators, commercial gaming operators, and industry groups, which have argued federally regulated event contracts could divert wagering activity from state-regulated sportsbooks while bypassing state licensing requirements, responsible gambling protections and gaming tax structures.
The legal fight over sports event contracts continues to intensify following the Third Circuit's ruling earlier this year favoring Kalshi in its dispute with New Jersey. Additional litigation remains pending, including Nevada's appeal before the Ninth Circuit and the Commodity Futures Trading Commission's challenge to Minnesota's new law prohibiting sports event contracts, leaving uncertainty over the long-term regulatory framework governing prediction markets.
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Even with that uncertainty, DraftKings is accelerating investment.
Robins said more than 600,000 customers have used the company's prediction offering so far this year, with adoption exceeding internal expectations and acquisition costs running below those associated with sportsbook customers. Customer retention and engagement have tracked similarly to sportsbook users, while annualized total trading volume increased nearly fivefold from $2.3 billion in April to $11 billion in July.
Executives also highlighted several competitive advantages they believe distinguish DraftKings from rivals.
The company has launched its own exchange, obtained Futures Commission Merchant approval from the National Futures Association, and integrated in-house market-making capabilities. Combined with its brokerage platform, DraftKings said it now controls three critical layers of the prediction market value chain, allowing it to capture more economics while improving the customer experience.
Although prediction-market customers currently generate less revenue individually than sportsbook users, executives said the higher-margin economics of the business should ultimately produce comparable lifetime customer value.
Those investments did weigh on near-term profitability.
DraftKings generated $115 million in adjusted EBITDA during the quarter, with executives saying results would have been stronger absent customer-friendly sports outcomes and heavier-than-planned customer acquisition spending. Even so, the company maintained its full-year guidance of $6.5 billion to $6.9 billion in revenue and $700 million to $900 million in adjusted EBITDA, while reiterating that its core sportsbook business remains on track to generate roughly $1 billion in adjusted EBITDA during 2026.
With football season approaching, DraftKings' message to investors was unmistakable: prediction markets are no longer simply an adjacent opportunity worth monitoring. The company intends to compete aggressively for leadership in what management increasingly views as a permanent and rapidly expanding segment of the North American online gaming industry.
"We are not building to participate," Robins said. "We are building to lead and win."
