DraftKings Stock Slumps, But Prediction Market Spending Could Rise

Gaming stocks of all stripes are incurring punishment with the repudiation particularly harsh for the names linked to iGaming and sports betting. That includes DraftKings (NASDAQ: DKNG), shares of which are off nearly 22% over the past month and are now probing three-year lows.

That ongoing slump is occurring against the backdrop of bullish commentary from DraftKings on improved handle trends to start the 2026 NFL season and on the long-term view of the prediction market opportunity set. Citizens Equity Research analyst Jordan Bender met with DraftKings and other gaming executives at the Global Gaming Expo (G2E) in Las Vegas earlier this week, noting that online betting firms see some reasons to be optimistic, but caution is warranted.

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

Prediction Markets Double-Edged Sword for DraftKings

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.

CEO Jason Robins recently said DraftKings could make a “meaningfully greater investment” to lure more prediction market customers. At G2E, CFO Alan Ellingson noted to Bender that the company’s event contract-related spending could span two years, though he didn’t reveal a specific dollar amount.

The analyst said that could cause the sagging stock to become “range-bound” over the near term until more clarity emerges.

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

With Prediction Markets, ‘Peak Uncertainty’

The prevailing wisdom on the sell side holds that companies such as DraftKings can benefit even if the Supreme Court strikes down sports event contracts. The high court is expected to hear a prediction market case as soon as next spring, indicating that it may be smart for sports betting companies to boost event contracts investment ahead of that case.

That thesis is rooted in the notion that if the Supreme Court issues a ruling that’s adverse to sports derivatives, sportsbook operators can get back to business as usual, likely with more customers due to their prediction market investments.

“(DraftKings) acknowledged that it is currently at peak uncertainty, waiting for the legality of the product and it could be using this strategy with the share price depressed to build a database (i.e., Supreme Court says no to sports contracts), or accelerate into a podium position (i.e., Supreme Court says yes), knowing its future is bright regardless (share price will go up) and these are both long-term positive for the business, in our view,” concludes Bender.