Will Prediction Markets Disrupt DraftKings?

DraftKings and FanDuel have long dominated U.S. online sports betting, thanks to their early entry via daily fantasy sports.

That first-mover advantage, combined with cutting-edge technology and deep brand recognition, let both companies capture the lion’s share of the market as sports betting rolled out state by state.

But a new kind of competitor is emerging that could rewrite the rules of online wagering.

Key Points

• CFTC-regulated prediction markets like Kalshi can bypass state laws and target DraftKings’ high-margin parlay business.

• DraftKings is countering with its Railbird acquisition and exchange plans, leveraging its tech and brand advantage despite a 35% stock drop.

• With 11.5% market growth, 150% EBITDA expansion, and an EV/EBITDA under 22, analysts see over 100% upside in DraftKings shares.

A Disruptive Challenger Emerges

The biggest threat isn’t coming from a traditional sportsbook, it’s coming from prediction markets.

Platforms like Kalshi have opened a new front in the betting wars by operating under an entirely different regulatory framework.

Instead of being overseen by state gaming commissions, Kalshi’s markets fall under the U.S. Commodity Futures Trading Commission. This key difference allows it to legally offer yes/no futures contracts nationwide, bypassing state restrictions that bind DraftKings and FanDuel.

Recently, Kalshi took things further by introducing “combo” contracts, a version of same-game parlays. Parlays are beloved by players and sportsbooks alike because they promise big payouts, and deliver hefty profit margins to the house.

DraftKings and FanDuel have leaned heavily on parlays to boost revenue and Kalshi’s ability to mimic that model in a peer-to-peer format could chip away at one of the most profitable parts of the sportsbook business.

The Battle Is Fierce

DraftKings isn’t sitting still. Earlier this year, it acquired Railbird, a CFTC-regulated prediction exchange, signaling its intent to compete on Kalshi’s turf. FanDuel, owned by global gaming powerhouse Flutter Entertainment, is reportedly exploring a similar exchange platform of its own.

Still, the rise of prediction markets has spooked investors. DraftKings shares are down substantially from their 2025 highs, and Flutter is down big too.

Why the Long-Term Story Still Looks Strong

Even with short-term pressures, analysts remain bullish and the broader analyst consensus still suggests meaningful potential gains.

There are good reasons for optimism. The U.S. online betting market continues to expand rapidly at a near 12% compound annual growth rate through the rest of the decade.

And while prediction markets enjoy federal approval, their broader use for sports outcomes remains in a gray zone. If regulators tighten oversight or limit market scope, DraftKings could quickly regain ground as the established, compliant operator.

How High Could It Go?

From a valuation standpoint, DraftKings looks intriguing. With an enterprise value-to-EBITDA multiple under 22 and expected EBITDA growth near 150% this year, investors are getting a rapidly scaling business at a discount.

Management has emphasized operating leverage as fixed costs stabilize and revenue continues to climb, profits could accelerate sharply.

The stock may not double overnight, but the odds clearly favor long-term investors willing to hold through volatility. Between its leading brand and strong moat, DraftKings remains one of the most powerful players in a market that’s still in its early innings.