Truist Securities analysts have outlined a cautious but constructive outlook on the launch of DraftKings’ new prediction markets platform, describing the move as strategically significant but legally unsettled.
DraftKings rolled out its standalone DraftKings Predictions app in 38 states on 19 December.
The launch materially expands the company’s potential reach, adding access to roughly 30% of the US population through sports event contracts in jurisdictions where traditional online sports betting is not legalised.
The platform operates under the oversight of the Commodity Futures Trading Commission, rather than state gaming regulators, and offers contracts tied to sports and financial outcomes, with additional categories such as entertainment and culture expected to follow.
The Truist analysts believe DraftKings is proceeding with the launch without placing its core state gaming licences at undue risk, a stance they expect rivals to share.
They indicated that Flutter Entertainment, the parent company of FanDuel, is likely to introduce a competing product in the near term.
FanDuel had not launched a prediction markets app at the time of the analysis, though analysts had initially expected it to move ahead of DraftKings.
They also pointed out that Fanatics, a privately held operator, introduced its own prediction offering in 24 states earlier in the month.
Legal uncertainty remains a salient factor shaping the outlook. Multiple court cases are ongoing between states and prediction market operators, creating a fragmented regulatory landscape.
Truist expects the issue to persist, with a potential US Supreme Court review viewed as plausible, though not likely before mid-2026.
A legislative resolution at the federal level is considered less likely. The analysts framed this as a conundrum for investors, balancing the push for innovation against the risk of adverse legal outcomes.
Three broad prediction market scenarios identified
If sports contracts ultimately gain legal clarity and remain permissible, DraftKings and FanDuel could emerge as dominant players, potentially accelerating momentum for broader legalisation of online sports betting and even iGaming in additional states.
If sports contracts are banned, the analysts believe both companies would revert to their established online sportsbook oligopoly.
This would limit exposure to prediction market losses, provided there are no significant fines or regulatory sanctions.
A third scenario envisions prolonged uncertainty, during which alternative platforms such as Kalshi, Robinhood, and Coinbase could gain market share due to broader state access.
Operationally, DraftKings plans to connect its prediction product to multiple exchanges, beginning with CME Group, and to deploy its proprietary Railbird technology to expand market offerings and improve long-term economics.
The company has also extended its responsible gaming framework to prediction markets, emphasising user education, deposit limits, and self-exclusion tools.
Beyond prediction markets, Truist analysts provided an update on the core online sportsbook business, noting a meaningful improvement in operating conditions during the fourth quarter.
They observed that sporting outcomes have turned more favourable for operators after a difficult start to the NFL season. Handle remains strong despite concerns about potential cannibalisation from prediction products.
October handle and gross gaming revenue rose approximately 15% and 50% year-on-year, respectively, supported by higher hold rates.
November data showed continued strength, while early December figures from New York indicated a sharp year-on-year increase in revenue.
Key events during the holiday period, including Thanksgiving and Black Friday NFL games, were cited as favourable for operators due to underdog victories.
December events such as major boxing matches and Christmas Day NFL games were also identified as influential.
The analysts explicitly compared these results with the unfavourable NFL outcomes seen in the prior year, highlighting a notable shift in operator profitability.
Reduced longer-term earnings expectations
For DraftKings, the firm maintained its fourth-quarter EBITDA estimate at the midpoint of company guidance but lowered projections for 2026 and 2027 by 22% and 18%, respectively.
These revisions reflect more conservative assumptions around betting hold, additional costs tied to prediction markets, and expenses associated with media partnerships.
Similar, though smaller, reductions were applied to Flutter’s longer-term outlook. Price targets were trimmed to $43 for DraftKings and $280 for Flutter, while maintaining Buy ratings on both stocks.
Early adoption metrics suggest prediction markets are gaining traction but remain behind established competitors.
Jordan Bender of Citizens is also tracking early performance data and noted that the DraftKings Predict app generated roughly 16,000 downloads during its first two days of availability, Friday and Saturday.
That figure trailed Kalshi, which recorded about 167,000 downloads over the same period, while Fanatics posted approximately 900.
According to Bender, the combination of a high-profile fight and the opening round of the college football playoffs drove a significant wave of customer acquisition.
Download activity reached its highest levels for both DraftKings and the FanDuel sportsbook since the opening week of the NFL season, while Kalshi experienced its strongest download volume on record outside of the 2024 election cycle.