DraftKings Looking to Push into Prediction Markets

DraftKings, a leader in digital sports entertainment and gaming, has been making strategic moves to diversify its portfolio beyond traditional sports betting. The company has been closely monitoring regulatory developments with a particular interest in prediction markets, while simultaneously exploring cryptocurrency integration and leveraging artificial intelligence to enhance its offerings.

DraftKings’ Strategic Push into Prediction Markets

The Boston-based gaming giant has signaled strong interest in entering the prediction markets sector, registering a new venture called “DraftKings Predict” with the National Futures Association (NFA). This registration was filed under Gus II LLC in July 2024, with DraftKings co-founder Paul Liberman named as CEO and current CEO Jason Robins listed as an indirect owner.

Prediction markets allow users to wager on various future events, including political elections, economic indicators, and entertainment awards. These markets have gained significant traction in recent years, though their legal status remains subject to ongoing regulatory debate. During a recent meeting with investors at DraftKings’ Boston headquarters, CEO Jason Robins and CFO Alan Ellingson emphasized the company’s readiness to capitalize on potential regulatory green lights, viewing prediction markets as a promising revenue stream.

Industry analysts believe DraftKings possesses several competitive advantages for entering this space, including its established brand recognition, extensive user base, and cross-selling opportunities through existing products like DK Horse and Fantasy Sports. However, the company has yet to take definitive action, seemingly waiting for a favorable ruling from the Commodity Futures Trading Commission (CFTC).

The timing may be auspicious, as regulatory attitudes appear to be softening. Brian Quintenz, a former board member of prediction market company Kalshi, now chairs the CFTC, which has prompted speculation about more favorable treatment for prediction markets. During a recent earnings call, Robins expressed “keen interest” in entering the prediction market space, confirming the company’s strategic intentions.

Regulatory Landscape and Challenges

The path to prediction market implementation isn’t without obstacles. The CFTC has traditionally maintained a restrictive stance on prediction markets, particularly regarding event contracts on politics and sports. The commission has announced a hearing on the viability of sports-related event contracts, signaling its willingness to reassess the regulatory framework.

State-level regulations present additional complexity. Several states including New York, Massachusetts, Indiana, Maryland, and New Hampshire have active proposals for iGaming legislation, potentially opening new markets for DraftKings. However, potential tax rate increases in states like Maryland and Massachusetts pose risks to profitability.

Recent regulatory challenges have already impacted some of DraftKings’ offerings. Texas recently halted the company’s Jackpocket lottery service, though Robins characterized this as an isolated incident with minimal financial impact. The company has been working to offset any potential revenue losses through strategic adjustments in other areas.

Expanding Horizons: Cryptocurrency Integration

Beyond prediction markets, DraftKings has been exploring cryptocurrency payment options to enhance its platform’s capabilities. When asked about accepting cryptocurrency payments during the company’s fourth-quarter earnings call in February 2025, Robins confirmed, “It’s certainly something we’re looking at,” while acknowledging regulatory hurdles.

It’s also getting regulators comfortable with it. They’re usually cautious around crypto. There are only a handful of states open to it at the moment. – Jason Robins

The integration of cryptocurrencies like Bitcoin, Ethereum, and stablecoins into sports betting platforms offers several advantages: faster transactions, lower fees, and enhanced privacy. Blockchain technology could also ensure transparent betting by enabling users to verify outcome fairness.

The crypto betting industry itself has experienced remarkable growth. In November 2024, Polymarket dominated headlines with its accuracy in predicting the U.S. presidential election and achieved a monthly trading volume of $2.5 billion. Industry data suggests that approximately 17% of all iGaming bets in the first three quarters of 2024 were placed using cryptocurrency.

Leveraging AI for Market Analysis

Another frontier for DraftKings involves harnessing artificial intelligence and machine learning to enhance market predictions and trading strategies. The intersection of AI and cryptocurrency has created new avenues for market analysis, with machine learning algorithms capable of parsing vast datasets to identify patterns invisible to human analysts.

For companies like DraftKings looking to enter prediction markets, AI offers powerful tools to improve analytical capabilities. Machine learning algorithms can process market data quickly, identify non-linear relationships between variables, adapt predictions over time, detect market anomalies, and analyze sentiment by evaluating social media and news related to various prediction categories.

As natural language processing advances, sentiment analysis capabilities will continue to improve, while the availability of big data enables more comprehensive analyses of market trends. This technological evolution aligns with DraftKings’ focus on enhancing user experience through innovation.

Financial Performance and Analyst Outlook

Citizens JMP analysts, led by Jordan Bender, have maintained their Market Outperform rating for DraftKings stock, with a $60 price target. This endorsement followed the meeting with Robins, Ellingson, and Senior Director of Finance Michael DeLalio at the company’s Boston headquarters.

The analysts expressed confidence in DraftKings’ long-term business trajectory, noting that current macroeconomic conditions posed no immediate concerns for the company’s performance. This positive outlook is supported by impressive financial metrics, including 30% revenue growth over the past twelve months, with analysts forecasting an additional 35% growth for the coming year.

Citizens JMP’s $60 price target is derived from a combination of an 18x multiple of estimated 2026 EBITDA and a 20x multiple of projected 2026 free cash flow, reflecting confidence in the company’s future financial health and market performance. Some analysts have even more optimistic projections, with price targets ranging from $35 to $75 per share.

Looking ahead, DraftKings has provided guidance for 2025 that suggests continued strong growth, with revenue expected between $6.2 billion and $6.6 billion and adjusted EBITDA projected between $900 million and $1 billion. For 2026, some analysts forecast a Return on Capital Employed of 35.2% and an Operating Margin of 16.5%, with Free Cash Flow potentially reaching $1,179 million.

Growth Strategies and Market Expansion

DraftKings has identified several key areas for growth in 2025, with live betting at the forefront following recent acquisitions of Simplebet, Sports IQ Analytics, and Mustard Golf. The company also plans to focus on growing and integrating certain verticals, including Jackpocket, the leading digital lottery courier app.

Robins highlighted Jackpocket’s efficiency as an acquisition channel for the DraftKings ecosystem, noting that the app recently reached the top 5 in the entertainment category of the App Store when the Mega Millions jackpot hit $1.2 billion. In 2025, DraftKings believes Jackpocket is positioned for growth through larger prizes, expansion into more states, and an extended product offering that includes scratcher games.

The company’s strong market position, innovative product offerings, and strategic acquisitions position it well for future growth. However, entering prediction markets requires substantial capital investment for setup. Analysts suggest DraftKings might initially leverage third-party platforms before building its own infrastructure, or possibly acquire existing companies like Kalshi to rapidly gain market share.

Market Potential and Price Projections

DraftKings has established itself as a leader in the digital gaming industry, using cutting-edge technology to drive growth. With revenue reaching $1.1 billion, the company has demonstrated its ability to leverage technology to enhance user experience and expand market reach.

Despite impressive growth, DraftKings faces challenges with a reported net income of -$293.7 million. However, this deficit must be considered in light of substantial investments in expansion and market share acquisition.

A significant advantage for DraftKings is its partnerships with major sports leagues and teams, which reinforce its market position and consumer trust. The company’s operational presence in approximately 30 U.S. states and parts of Canada underscores its broad reach and potential for further growth as more states legalize online gambling.

Some analysts believe DraftKings stock could reach $82 by 2025. While this target appears optimistic, continuing legalization of online gambling coupled with DraftKings’ technological advancements create a promising environment for significant price appreciation.