As DraftKings CEO Jason Robins touts significant inroads in the prediction markets business, analysts at Citizens laid out a potentially billion-dollar assessment and expectation of the company’s potential.
Jordan Bender and Isabelle Slavin wrote in a note published June 19 that they believe, based on early activity and industry comparisons, that the prediction markets opportunity could be worth in the region of $1bn by 2030, assuming that DraftKings Predictions can attain 20% to 30% market share across its active states.
That, noted the analysts, is similar to the company’s current size in terms of equity value.
“While the business remains in its early stages, our analysis suggests the opportunity could ultimately be larger than the company’s current market cap,” wrote the analysts. “… By 2030, we estimate the prediction market opportunity could generate ~$907M of revenue at a 20% market share across its operating states and ~$1.3bn at a 30% share.
“Applying Kalshi’s implied revenue multiple ($22bn valuation; $2bn of annualized revenue) suggests a 20% market share could be worth ~$10 billion of EV for DraftKings and ~$14bn at a 30% share, similar to the company’s current size. In other words, we do not believe the market is appropriately valuing the opportunity.”
Naturally, this assumes that the sports event contract opportunity remains available to DraftKings and other operators. Court battles throughout the United States continue, with most observers suggesting a Supreme Court case is inevitable.
DraftKings pouring cash into Predictions
DraftKings launched the standalone DraftKings Predictions app in December in 38 states, including offering sports contracts in 17 states in which it did not have authorization to offer state-regulated sports betting.
It since expanded that geographical reach. As of today, DraftKings Predictions is live in 48 states, excluding only Maine, where it is one of two approved tribal-tethered sports betting operators, and New Hampshire, where it holds a monopoly as the only authorized sportsbook. It offers sports event contracts in 18 states.
The DraftKings Predictions product also evolved significantly in the six months since launch, when it initially hosted only a limited range of CME Group event contracts:
- It now offers player prop-style and parlay-equivalent Combos markets from Crypto.com
- It has also rolled Predictions into its multi-vertical “super app”
- It will soon launch an in-house exchange via Railbird
The upgrades appear to be paying dividends. DraftKings stated earlier this month that in May, its Predictions offering grew 24% and 34% month-over-month in annualized consumer volume and annualized total volume traded, respectively.
“Predictions, especially in sports, is a strategic priority for DraftKings,” Robins said at the time. “This category is still in its first inning, and we believe DraftKings is best positioned to define it. We are planning significant investment in the coming months to improve our offering, build liquidity, and scale customer acquisition. We intend to execute with urgency and establish a leadership position in Sports Predictions before year-end.”
DraftKings targeting up to 3 million new customers?
Robins said on an earnings call in May that DraftKings is seeing volume traded on event contracts per customer now outpacing sportsbook handle per customer, and that customer acquisition costs dropped 80% in April as a result of DraftKings integrating Predictions into its “super app”. He was also firm that sports trading is not cannibalizing sports betting, as a result of the two products operating in different states and catering to somewhat different customers.
The Citizens analysts added in their note that DraftKings app downloads are up 249% month-to-date in June, as the company is now in full flow of acquiring customers through “a sports offering that is now live across the U.S.” They added that they believe the company is targeting between two million and three million new customers in 2026 based on current customer acquisition costs and marketing spending.
Railbird integration and market-making could be difference-makers
While the acquisition of then-newly CFTC-licensed Railbird Exchange was its way into offering predictions, DraftKings has not yet launched its in-house platform based on Railbird. Executives suggested in recent weeks that will come soon, as will the significant step of DraftKings making its own markets rather than relying on the likes of CME Group and Crypto.com.
The Citizens analysts noted that stands to be transformational for DraftKings Predictions’ early business.
“Currently, the company has no meaningful market-making activity and little volume flowing through its exchange, implying that the figures reported to date are relatively insignificant from an earnings perspective,” added Bender and Slavin. However, they added that by NFL season, they expect DraftKings could begin routing a significant amount of volume through its own exchange “while simultaneously making markets in a more meaningful way on both its own exchange and third-party platforms.”
“Market making is the most attractive layer,” they added. Bender and Slavin opined, based on their consultation with market-makers, that DraftKings’ sports betting expertise means it will likely focus its event contracts market-making efforts on sports as its competitive advantage, and that the economics “appear highly attractive”.
“Our discussions suggest that market making offers superior economics relative to nearly every other area within consumer discretionary, providing a compelling and durable runway for growth for DraftKings.”
