Prediction Markets Reignite Sportsbook Spending Battle Ahead of NFL Season

Prediction markets are reshaping the battle for U.S. sports bettors, pushing the country's largest operators toward another customer acquisition fight just as the industry had begun emphasizing profitability over market share.

Key Takeaways

• Leading sportsbook competitors are set to engage in "very aggressive, irrational" spending.
• One major book views its prediction market as a way to acquire customers in states without legal online sportsbooks.
• Sportsbook operators spent billions in the early years of U.S. sports betting expansion and appear to be taking a similar approach to growing their prediction market products.

DraftKings, FanDuel, and PENN Entertainment are among the major sportsbook operators that used their second-quarter earnings calls to outline disparate approaches to an industry whose focus is becoming more dominated by the growing prediction market industry. But their comments point toward the same competitive reality: Sports betting companies are preparing to spend more to acquire and retain sportsbook customers while dealing with the new financial environment around prediction markets.

A revised spending approach comes as the broader U.S. sportsbook market shows signs of maturation. Nationwide betting volume has struggled to maintain the double-digit growth rates that characterized the industry's earlier expansion at the start of the decade, increasing the importance of new products and previously inaccessible customers.

The shift could become particularly visible during the upcoming NFL season, historically the industry's most important period for customer acquisition and revenue. The country’s leading online gaming operators are projecting to lose more than $500 million in combined adjusted EBITDA just from investing and marketing their prediction market platforms.

PENN CEO Jay Snowden, whose company has not pursued a prediction market platform, warned that its larger competitors are set to engage in "very aggressive, irrational" spending as prediction markets add another layer to the fight for customers.

"We're anticipating that there could be a bit of an arms race as we head into football season," Snowden said.

DraftKings sees incremental customers

DraftKings' second-quarter results illustrate why operators may be willing to spend. Customer acquisition increased nearly 75% year over year during the quarter while sports-consumer volume increased 15%, the company said in its second-quarter earnings release.

DraftKings, the nation’s No. 2 sportsbook by handle, has also seen prediction activity accelerate rapidly, with annualized volume increasing nearly fivefold between April and July. More than 600,000 customers had used the company's prediction product through the first half of the year.

DraftKings was boosted by its universal app that automatically switches customers between its prediction market and sportsbook platform, depending on legality in the state.

Perhaps more importantly for the company's investment thesis, DraftKings said it hasn't seen evidence that the prediction business is cannibalizing its established sportsbook.

Management said customer overlap with the leading prediction market operator was roughly 1% in states with legal sports betting. DraftKings also estimates that between 80% and 90% of prediction market volume in sportsbook states comes from professional syndicates and institutional traders rather than the traditional recreational sportsbook customers that have previously made up the vast majority of their customer base.

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FanDuel spending for future growth

Flutter Entertainment is making a similar calculation.

The FanDuel parent views its prediction market as a way to acquire customers in states without legal online sportsbooks and potentially establish relationships before those jurisdictions legalize traditional sports betting. Like DraftKings, Flutter has said on recent earnings calls that cannibalization of its sportsbook business remains limited.

That creates a significant incentive for operators to continue investing. If prediction markets are attracting new customers without meaningfully reducing sportsbook activity, the platforms become another customer acquisition channel rather than a replacement for an existing product.

To capture this, the nation’s No. 1 sportsbook operator by market share is also increasing “customer generosity” in FanDuel Predicts and expects roughly $50 million in 2026 prediction market-making revenue, further demonstrating how quickly the category has moved into operators' broader financial strategies.

NFL season could test spending discipline

The competing strategies will face their biggest test when football returns.

Sportsbook operators spent billions of dollars acquiring customers during the first years of U.S. sports betting expansion before shifting toward promotional discipline and profitability. Prediction markets could reverse that transition.

The nation’s two largest sports betting operators, which combined have more than two-thirds of the U.S. market share, reached sustained profitability in recent years after hundreds of millions of dollars in losses. But trailing upstart prediction market-focused platforms such as nationwide leader Kalshi, the companies have had to again pivot.

As the new wave of prediction market acquisition pushes grow, smaller operators have sought to maintain their positions without incurring massive losses reminiscent of the early days of legal U.S. sports betting outside Nevada.

PENN's warning is particularly notable because the company has deliberately moved in the opposite direction, cutting spending on customers it considers unlikely to generate sufficient long-term returns. The company maintains focus on its large brick-and-mortar casino gaming portfolio, a key factor in its absence from the prediction market space, while seeking profitability from its online gaming division.

Rush Street Interactive is also taking a more cautious position. The BetRivers operator has maintained a “flexible approach” to prediction markets while executives evaluate how the emerging industry affects its existing businesses.

Prediction markets can operate across state lines under federal commodities regulation, giving operators potential access to customers in high-population states including California and Texas where traditional sportsbooks remain prohibited. As legal battles rage over their legality in more than a dozen states, the larger established sportsbook companies believe the greater threat is missing out on the new industry, rather than unsuccessful legal challenges.

Speaking during his company’s second-quarter earnings call last week, DraftKings CEO Jason Robins said prediction markets present a new opportunity that rivals its established sports betting environment. A spending wave from the nation’s largest gaming operators underscores this potential.

“As we continue to improve our platform and monetization over the next several years, we believe that we can generate lifetime values on predictions customers similar to those on our sportsbook customers,” Robins said. 

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