Prediction market potential
DraftKings is considering launching a prediction market ahead of the next US election, according to CEO Jason Robins.
Prediction markets had a major surge in popularity during the US presidential election, with the likes of Polymarket and Kalshi enjoying a huge increase in volume and coverage on social media and in the press.
Over $3.2bn was wagered on the outcome of the election on Polymarket alone, causing a media storm about the legality of betting on elections, plus opportunities for them to be used to influence the results of the contest.
it appears that prediction markets will be here to stay in the US betting landscape
However, after Kalshi won a court case allowing it to offer bets on the race, it appears that prediction markets will be here to stay in the US betting landscape for the foreseeable future.
New territory
During a Friday morning call for investors, Robins was asked about the possibility of moving into non-sports prediction markets by an analyst, replying that it was “a very interesting thing.”
“The market within that that’s dominant is election markets, of course, and particularly during presidential elections. So I know there’s a lot of tension on it over the last few weeks,” said Robins.
definitely something we’re looking at in advance of the next presidential election”
“I do think there could be a place for it outside of elections, but that’s really where the interest seems to be now from a … customer demand side. So, definitely something we’re looking at in advance of the next presidential election, and potentially it’ll be an opportunity to look at something sooner.”
One potential stumbling block for DraftKings to overcome is that prediction markets are licensed in a different manner to traditional betting products. Instead of being regulated by state gaming bodies, they instead fall under the jurisdiction of the Commodity Futures Trading Commission.
“It’s not licensed as a betting product, it’s licensed as a financial market,” Robins said. “It’s definitely a very different thing. So we’ll have to see where it fits in the priority list, but it is something we’ll plan on looking at ahead of next election for sure.”
Drive for diversification
Elsewhere on the call, DraftKings revised EBITDA projections downwards after a run of NFL results which Robins described as “customer-friendly.” Revenue estimates were down $250m, and EBITDA by $120m.
The volatility and dependence on NFL results may indicate a compelling reason for DraftKings to look to enter the prediction market as it seeks to diversify its offerings and market exposure.
In the short-term, the overall trajectory of our business is strong”
“While we experienced the most customer-friendly stretch of NFL sport outcomes we have ever seen early in the fourth quarter, which pressures revenue and Adjusted EBITDA,” said Robins. “In the short-term, the overall trajectory of our business is strong.”
The operator has already made moves into other territories outside of sports betting, notably dipping a toe into the world of online poker with its launch of player-vs-player games in two states.