DraftKings Stock Drops Sharply After Company Reveals Huge Spending on Prediction Markets

DraftKings, the Boston-based company famous for its sports-betting app, saw its stock price fall sharply on Friday. Shares dropped 21 percent, landing at $18.51. The drop came after the company revealed it is spending as much as $700 million this year to grow its presence in a new type of online betting called prediction markets. Investors were caught off guard by just how much money the company is putting into this new area.

DraftKings made the announcement as part of its third-quarter earnings report, which is a regular update companies give about how much money they are making and spending. The company said the $700 million is mostly going toward marketing — in other words, ads and promotions to bring in new customers. That figure is more than twice what DraftKings had said it would spend before. The surprise jump in spending is a big reason investors got worried.

Prediction markets are different from regular sports betting. In traditional sports betting, you place a bet against a company called a sportsbook, which sets the odds. In a prediction market, players bet against each other by buying and selling contracts tied to the outcome of future events, like who will win a game. Right now, sports betting is controlled by individual states, while prediction markets are overseen by the federal government.

One reason so many people are nervous is that the future of prediction markets could be decided by the U.S. Supreme Court, possibly as soon as next year. If the Supreme Court rules against using prediction markets for sports wagering, DraftKings could lose a lot of the money it is now spending. Morningstar analyst Dan Wasiolek said: "It's a big number, and I think bigger than what people thought. Why not just wait?"

DraftKings CEO Jason Robins pushed back on those worries during a call with investors and analysts on Friday. He said that even if the Supreme Court blocks prediction markets for sports, the company will earn back its money over time. One way it plans to do that is by selling its other products to customers who first came for the prediction markets.

DraftKings has a strong track record in sports betting. It now runs online sportsbooks in 28 states, including Massachusetts, and is tied with rival FanDuel for the number one spot in that industry. But two companies — Kalshi and Polymarket — got to prediction markets first, and DraftKings is currently ranked third in that newer space.

To close the gap, DraftKings is trying to match what its rivals spend on marketing. Kalshi is rumored to be spending around $2 billion on marketing in 2026, while Polymarket is spending about half that amount. A banking analyst named Jordan Bender wrote that DraftKings is "playing from behind" but wants to be "number one."

Some analysts asked Robins whether focusing so much on prediction markets was hurting the core sports-betting business. Robins said absolutely not, pointing out that DraftKings has stayed tied for first in sports betting while also climbing to third in prediction markets at the same time. The company expects to bring in between $6.35 billion and $6.55 billion in total revenue this year, with prediction markets contributing up to $750 million of its 2027 total.