DraftKings and FanDuel Enter Prediction Markets Amid Regulatory Scrutiny and Mixed Earnings

DraftKings CEO Jason Robins emphasized that prediction markets are not replacing traditional sports betting, citing differences in experience, market scale, and pricing depth. He stated, 'Simply going and spending five minutes looking at the products, you’ll see what I mean. It’s night and day.' Robins pointed to the U.K. and Western Europe, where exchange-based betting holds only a low to mid single-digit market share, indicating no large migration from sportsbooks.

Despite this stance, DraftKings is expanding into prediction markets through the acquisition of RailBird and plans to launch a mobile app for betting on non-sports events like entertainment and finance. This move is strategic for states where online sports betting remains illegal, such as California and Texas. Robins noted, 'I think the reality is that at least for the near term, it looks like the momentum is here. They’re here to stay.'

In quarterly earnings, DraftKings reported revenue of $1,144 million, a 4% year-over-year increase, but lowered its full-year sales outlook, causing a stock plunge of over 5%. Monthly Unique Payers grew 2% to 3.6 million, with Average Revenue per MUP at $106, up 3%. The company raised its 2025 revenue guidance to $5.9–6.1 billion, representing 28% growth, and expanded its share repurchase program to $2.0 billion.

FanDuel and DraftKings launched prediction market plays in 2025, but face regulatory challenges as state authorities push back against federal oversight by the CFTC. Weekly prediction market volume recently topped $2 billion, with projections suggesting the industry could reach $95.5 billion by 2035 at a 46.8% annual growth rate. Bank of America downgraded both companies, citing stiff competition and declining margins, with DraftKings' price target cut to $35.

Legal experts warn that state regulators could threaten existing sportsbook licenses, potentially favoring newcomers like Polymarket and Kalshi. This tension may escalate to the Supreme Court, impacting the broader adoption of prediction markets.