DraftKings, FanDuel Downplay Prediction-Market Cannibalization

DraftKings stock has fallen roughly 50% over the past year, while FanDuel parent Flutter Entertainment’s stock has fallen close to 69%. Yet both companies insist the rise of prediction markets is having little impact on their traditional sportsbooks.

The companies each missed earnings expectations this week, although DraftKings maintained its full-year guidance while Flutter cut its full-year profit guidance by 22%. Both DraftKings and Flutter are trading up after reporting second-quarter earnings—as of mid-afternoon Friday, the former was up around 6% and the latter was up a little over 2%. DraftKings says it is seeing “no discernible impact” from prediction markets on its traditional sportsbook business, and Flutter says FanDuel has seen a “low single-digit” impact.

But the broader stock slide is impossible to ignore. The rise of platforms like Kalshi and Polymarket has created a new set of competitors for traditional sportsbooks, with an “arms race” expected as the NFL season nears. All of this raises the question of why these companies are facing such stock pressure despite their claims that there is very little cannibalization.

“That’s a great question for someone on Wall Street to answer,” DraftKings CEO Jason Robins tells Front Office Sports. “This is a little bit of a period where people are concerned because there’s something that’s new, and it’s an unknown.”

Robins says the company’s core business is strong, and that internally, DraftKings has a better view than outside investors. On the earnings call, he said DraftKings looks beyond its own internal data, pointing to third-party data and other “ways that we’ve triangulated various metrics.”

“That helps us develop a greater conviction of two things,” Robins tells FOS. “Our core business is not seeing much of any impact from predictions. And we’re still growing, strong, and healthy, and generating significant cash flow.”

According to Robins, DraftKings sees only about 1% customer overlap between its sportsbook and the “largest prediction-market operator” in states with legalized sports betting (while he didn’t explicitly name the company, he appeared to be referencing Kalshi, which BofA Securities analysts say has the largest market share in the country by a wide margin).

DraftKings and FanDuel late last year each launched their own prediction-market platforms with a focus on states where online sports betting is not legal, like California, Texas, and Georgia. Both companies continue to believe that prediction markets present an “incremental” opportunity, including to add customers in states without legalized sports betting. Robins said on the earnings call that DraftKings’ prediction-market platform is “growing faster than we anticipated.” Prediction markets have also created new opportunities for the duo, like market making. 

Barry Jonas, senior gaming analyst at Truist Securities, tells FOS “given their skill sets and product and trading capabilities, they could certainly pick up market share on the exchange side, and may also lean more into market making.”

Over the long-term, Robins expects the stock to reflect the company’s results, which he believes will remain strong (the company reported positive net income for 2025’s fiscal fourth-quarter, the first time in company history).

“There are a lot of scary headlines out there,” he tells FOS. “We’ll keep executing our playbook, and hopefully one day we’ll get a little more credibility for it. We can only focus on what’s in our control.”

Analysts Remain Skeptical

Analysts who cover the industry aren’t convinced the impact from prediction markets has been as minimal as DraftKings and FanDuel would like the public to believe. Citizens analyst Jordan Bender estimated in January that prediction markets were creating a roughly 5% cannibalization impact across the sports-betting industry.

“I’m still very confident in my 5% number,” Bender tells FOS.

He notes that prediction-market platforms are likely preparing to increase marketing spend as the NFL season kicks off. “That’s not a formula for cannibalization to slow down,” Bender says. “The question is really, how much does it accelerate from here?”

Jonas says the degree of cannibalization  “is debatable.” He expects the impact to become more meaningful as prediction-market products mature, particularly as “combos”—which are akin to parlays in traditional sports betting—attract customers beyond professional traders.

Jonas also notes that sports betting companies can’t count on the courts to save them from prediction markets. There are numerous lawsuits winding through the U.S. court system over the issue of sports event contracts, and the U.S. Supreme Court is expected to eventually take up the issue. But even if it does, and rules that sports event contracts must be regulated at the state level, that doesn’t spell the end of prediction markets.

“It just means that the states will decide,” Jonas tells FOS. “Some states are clearly already contemplating taxing prediction markets. So even a Supreme Court ruling doesn’t necessarily mean it will all go away.”