DraftKings Inc (NASDAQ:DKNG) could benefit from the expected record $30 billion to be legally wagered on the 2025 NFL season. That’s an 8.5% increase from last year's betting handle.
But with rising competition from prediction markets like Kalshi, Polymarket and Robinhood Markets (NASDAQ:HOOD), DraftKings and other sports betting companies face the risk that they will have fewer customers.
Prediction Market Competition Heats Up
DraftKings ended the second-quarter with online sports betting operations in 25 states plus Washington, D.C. The company operates in markets that have legalized sports betting.
Kalshi, however, is in a gray area regarding sports betting. It’s legal throughout the U.S. and operates in all states.
Robinhood Markets, one of the largest investor brokerages, offers prediction markets to users through a partnership with Kalshi. It has prediction markets for NFL games and NCAA Football games for the power conferences (ACC, Big Ten, Big 12, SEC).
Originally offering just betting on the winner of NFL games, Kalshi recently launched other betting options like over/under, the spread and touchdown scorers for games in the 2025 NFL season.
Robinhood and other prediction markets offer lower fees to consumers and have a bigger access to customers. That could be among the reasons why Cathie Wood‘s Ark Invest has been selling its DraftKings stock this year.
Prediction markets are also attracting new funding rounds, bringing further validation to the segment. Polymarket, for example, is set to re-launch in the U.S. soon and is reportedly backed by New York Stock Exchange parent Intercontinental Exchange (NYSE:ICE).
Kalshi Hits Records
Kalshi is also seeing huge volume from its sports markets, particularly the NFL.
From Sept. 1 through Sept. 28, the first four weeks of the NFL season, Kalshi had $1.13 billion in betting volume on NFL contracts, making up 42% of betting volume in the time period, as reported by Sportico.
College Football bets made up 30% of betting volume for Kalshi in the same time period at $811 million.
Overall, sports prediction markets made up around 90% of Kalshi's volume during the time period, which is huge considering the company launched sports markets in January.
The company has set multiple volume weekly records in September, including $855 million in overall volume for the week of Sept. 22 through Sept. 28. That week saw $355 million wagered on NFL outcomes.
DraftKings Q3 Earnings On Deck
DraftKings’ third-quarter results and guidance, expected on Nov. 6, could mark an important turning point for the company and the sports betting sector. The quarter will include results from July, August, September, which means a full month of NFL results will be factored in.
Analysts expect the company to report a loss of 28 cents per share and revenue of $1.32 billion, versus a loss of 17 cents per share and $1.09 billion in revenue in last year's third quarter.
DraftKings beat analyst estimates for revenue and earnings per share in the second quarter. After reporting record revenue, net income and adjusted EBITDA in the second quarter, expectations should be high for the company. Given the pressure on the stock and potential competition, anything less than a beat and guidance raised could mark more downward pressure for shares.
The company maintained its full-year guidance of revenue of $6.20 billion to $6.40 billion after second-quarter results.
DraftKings included a hint at potential prediction market launches or acquisitions with a quote in the second-quarter results.
“The company’s guidance for fiscal year 2025 does not include the potential launch of a Prediction Markets offering,” the company said.
On future earnings calls, investors and analysts will likely ask DraftKings management about how competition is impacting the company. If the paying member base grows throughout the current quarter, that will provide a clue on whether prediction markets are eating market share.
Other sports betting related companies report earnings around the same time. Flutter Entertainment‘s (NYSE:FLUT) will release earnings in November, and BetMGM owner MGM Resorts International (NYSE:MGM) will report on Oct. 29.
Price Action: DraftKings shares are down 6.69% to $32.84 on Friday versus a 52-week trading range of $29.64 to $53.61. DraftKings shares have fallen 28.4% over the last month and are now down 9.0% year-to-date in 2025.
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