DraftKings stock drops 21%: Company doubles down on prediction markets

DraftKings shares fell 21 percent on Friday, closing at $18.51, after the Boston-based company disclosed a major increase in spending for its prediction market division. The drop followed the release of third-quarter earnings, which showed the firm is allocating as much as $700 million to the sector this year. This budget is more than double the amount previously communicated to the market, with the majority directed toward marketing efforts.

Investors reacted negatively to the financial commitment. Dan Wasiolek, an analyst at Morningstar, noted that the spending figure was larger than most people anticipated. He observed that the stock was under pressure because the company is moving aggressively before a potential Supreme Court decision on the future of prediction markets. Wasiolek questioned why DraftKings would not wait for that legal ruling before committing such capital.

Chief Executive Jason Robins faced direct questions about the strategy during the Friday earnings call. He argued that the company can recoup its investments over time, even if the Supreme Court restricts the use of prediction markets for sports wagering. Robins said the company plans to cross-sell products to these new customers to offset costs. He maintained that executives are not neglecting the core sports betting business in favor of the newer platform.

The competitive landscape has shifted with the rise of Kalshi and Polymarket. These operators allow users to bet against one another by buying and selling contracts linked to event outcomes, rather than betting against a centralized oddsmaker. Currently, traditional sports betting is regulated by states, while federal oversight applies to prediction markets. This regulatory split faces legal challenges that could reach the Supreme Court as soon as next year.

DraftKings projects revenue between $6.35 billion and $6.55 billion for the current year. For the following year, the company expects revenue to reach between $7.35 billion and $7.75 billion. Of that future total, $650 million to $750 million is expected to come from the prediction markets business. Jordan Bender, an analyst at Citizens, wrote that DraftKings is playing from behind in this specific market. He stated the company wants to be number one, leading it to match the marketing spend of Kalshi and Polymarket.

Kalshi is rumored to be spending $2 billion in 2026, while Polymarket is spending about half that amount. Robins responded to concerns about resource allocation by noting that DraftKings has become the third-largest player in prediction markets. At the same time, the company remains tied with FanDuel for the top spot in sports betting. Robins described the performance as stellar execution by his team, stating he does not think the company is giving up an inch in its primary market.