DraftKings: Parlays, Prediction Markets Prominent on Earnings Call

• Data indicate new customers embracing parlays in a big way
• Company mum on prediction markets plans, but monitoring situation

DraftKings (NASDAQ: DKNG) held its first-quarter earnings conference call earlier today with parlays and prediction markets ranking as two of the more prominent themes.

Shares of the sportsbook operator were higher in midday trading despite the gaming company altering 2025 guidance lower to adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $800 million to $900 million on revenue of $6.2 billion to $6.4 billion. That compares with a prior outlook of EBITDA of $900 million to $1 billion on sales of $6.3 billion to $6.6 billion with customer-friendly outcomes in the January through March period acting as the culprit.

Co-founder and CEO Jason Robins noted that if not for favorites winning at such a high rate during the NCAA Men’s Tournament, DraftKings would have raised its 2025 financial forecasts.

For the first time in tournament history, all four number one seeds reached the final four and three number two seeds and one number three seed reached the elite 8. Across the entire tournament, higher seeds won at an 82% rate, which is the highest rate in history,” said Robins on the call.

The issue of “chalk” winning at higher-than-usual rates in the NCAA Tournaments was already priced into DraftKings. That set the stage for the earnings to call to focus on other issues, including the sportsbook’s parlay opportunity set.

Parlays Prop Up DraftKings Results

DraftKings CFO Alan Ellingson told analysts the operator’s first-quarter structural sportsbook hold of 10.4% beat internal expectation and got a boost from a year-over-year increase of 370 basis points in parlay handle mix.

“We’ve had tremendous year-over-year gains in terms of both SGP and parlay mix and overall average live count,” said Robins regarding what DraftKings early in the Major League Baseball (MLB) season.

He added that in April, year-over-year MLB handle surged 36%, signaling potential opportunity as the US sports calendar nears a point where both the NFL and NBA are out of the equation.

Robins Discusses Prediction Markets

Last month, DraftKings pulled an application with the National Futures Association (NFA) that could have set the stage for the company to enter the fast-growing prediction markets space, but Robins said the operator is still monitoring the space. The DraftKings chief executive officer said the reach of derivatives exchanges offering sports event contracts is acting as a conversation starter on the regulatory front.

“I think as it continues to grow, that’s just going to continue to be a powerful lever that this is happening whether you want it to or not, so do you want to do it in a way that makes sense,” he said in response to an analyst question. “If you’re a California tribe or if you’re a state that hasn’t legalized it yet, does it allow you to prosper or do you want to watch it happen somewhere else, and I think that’s something that everybody is talking about right now.”

Earlier this week, DraftKings rival and FanDuel parent Flutter Entertainment (NYSE: FLUT) said it’s monitoring the prediction market situation in the US and it could explore related opportunities in the future because it has experience in the space by way of Betfair Exchange.