DraftKings and FanDuel continue to insist traditional sportsbook products remain their primary focus. But both used earnings calls this week to signal a deeper push into prediction markets through market-making activity.
Market makers provide liquidity by posting bid and ask prices for contracts to enable trading. Among the prominent market makers in the industry are Susquehanna International Group and Jump Trading.
DraftKings, which beat analyst expectations for the first quarter and maintained its full-year guidance, said during Friday’s earnings call that it continues to view prediction markets as a “massive incremental opportunity.” In addition, the company revealed it has launched market making. CEO and cofounder Jason Robins said the move “unlocks access to an additional layer of the value chain,” and noted it is “already generating a positive return for us.” (Market makers make money by earning a small margin on each trade by buying and selling at slightly different prices).
“It’s one of our fastest to profitability business lines we’ve ever launched, so really excited about that,” Robins said. The company says there’s “a lot of opportunity” to scale its market making business, with Robins adding there’s no reason DraftKings shouldn’t be one of the top two or three market makers in the world. “Arguably the best, given our modeling capabilities.”
While DraftKings will focus mostly on market making for its own product, Robins said the company will likely participate on a variety of platforms—although he didn’t specify them, that could include competitors like Kalshi and Polymarket.
JPMorgan analysts noted that “April momentum picked up” for DraftKings Predictions, with volume per customer “exceeding” sportsbook handle per customer.
FanDuel’s parent, Flutter Entertainment, also reported earnings this week. The company beat analysts’ expectations for Q1 but lowered its full-year guidance. The earnings were overshadowed by an executive shakeup that saw CEO Amy Howe pushed out after five years.
Flutter said it views prediction markets as a “very attractive, incremental opportunity” that provides a route to “acquire customers ahead of sports betting regulation in new states.” Flutter also said it’s “making good progress” on FanDuel Predicts, while acknowledging that the “fast moving and complex regulatory environment means that product delivery timescales have at times been challenging.”
Additionally, Flutter said that last month it began acting as a market maker for a “major, third-party prediction-market platform.” CEO Peter Jackson said there is “opportunity to monetize this category” through market making, and that the plan is to provide market making “on as many platforms as we can.”
JPMorgan analysts expect “uncertainty will remain high” in the near-term future for Flutter, citing the executive shake-up and the fact that it’s still “early days” for the company’s prediction-market strategy.
‘Underappreciated’ Opportunity
Reactions to the news that DraftKings and FanDuel are now market makers has been mixed. Analysts at Citizens said the push into market making by DraftKings “is an opportunity that we believe remains underappreciated and could serve as an upside catalyst for the stock.” On social media, some claimed the companies’ entry into market making disproves a major industry talking point: that in prediction markets, bets are peer-to-peer and there is no “house.”
Garrett Gomes, a partner at merchant bank and advisory firm The Raine Group who focuses on sports and real money gaming, tells Front Office Sports the reality is nuanced.
“At a high level, prediction markets are designed to be peer-to-peer, with users trading against one another rather than a traditional sportsbook ‘house,’” Gomes says. “In practice, though, especially in newer or less liquid markets, that dynamic isn’t always perfectly balanced.”
According to Gomes, market makers play a “meaningful role” in ensuring continuous liquidity, allowing users to enter and exit positions while keeping markets functioning smoothly. He tells FOS that FanDuel and DraftKings acting as market makers “should help improve that trading experience.”
“I think both things can be true,” Gomes says. “Increased market-making activity should improve liquidity and usability, which is a clear positive for platforms and users, while also making the ecosystem look less purely peer-to-peer than it might in theory.”
