DraftKings Stock Dips as Operator Eyes Expanded Prediction Market Investment

Gaming stocks are facing a broader market downturn, with iGaming and online sports betting operators taking the brunt of the sell-off. That includes DraftKings (NASDAQ: DKNG), whose shares have fallen nearly 22% over the past month to approach three-year lows.

That ongoing slump comes despite bullish commentary from DraftKings executives regarding improved wagering trends at the start of the 2026 NFL season and a positive long-term outlook for prediction markets.

Citizens Equity Research analyst Jordan Bender met with DraftKings and other gaming executives at the Global Gaming Expo (G2E) in Las Vegas, noting that while online betting firms see reasons for optimism, analysts remain cautious.

Bender pointed out that DraftKings management reported sports betting handle was up 15% in September, with turnover on the company’s DKeX yes/no exchange pacing 2.5 times ahead of July levels.

Prediction Market Capital Allocation

While volume on DKeX is surging and some analysts believe DraftKings’ exchange and market-making fees could do the same, investors may be focusing on the company’s prediction market spending plans, which are already elevated in the eyes of some shareholders.

Chief Executive Officer Jason Robins recently stated that DraftKings could make a “meaningfully greater investment” to acquire prediction market customers. At G2E, Chief Financial Officer Alan Ellingson told Bender that event contract-related expenditures could span two years, though he did not disclose a specific dollar figure.

Bender suggested that sustained capital outlay could keep the stock range-bound over the near term until clearer financial guidance emerges.

“We believe prediction market investment could reach $450 million to $500 million for the year, leading to our recently revised 2026 earnings before interest, taxes, depreciation, and amortization (EBITDA) estimate of $532 million—a 14% decline from 2025,” Bender observed. “We believe attractive payback periods and customer response are driving the strategy to increase investment in the near term.”

Legal Uncertainty and Supreme Court Outlook

Sell-side analysts generally maintain that sportsbook operators like DraftKings stand to gain even if federal courts ultimately restrict sports event contracts. A pending prediction market case could reach the U.S. Supreme Court as early as next spring, prompting gaming operators to accelerate customer acquisition ahead of a ruling.

Analyst consensus suggests that if the high court issues an adverse ruling on sports derivatives, operators can return to traditional sports betting with expanded user databases built during the prediction market push.

“[DraftKings] acknowledged that it is currently at peak uncertainty, waiting for regulatory clarity on the product,” Bender concluded. “It could be using this strategy with the share price depressed to build a database or accelerate into a podium position, knowing its core business remains solid regardless.”