DraftKings CEO Defends Investment in Prediction Markets

DraftKings CEO Jason Robins defended the company's plan to invest about $1 billion in prediction markets over the next two years. On the third-quarter earnings call, Robins said the company could still earn acceptable returns even if the Supreme Court someday removes sports event contracts from the market through a ruling.

The company's shares fell more than 20% in after-hours trading on Thursday. Investors were weighing the cost of DraftKings' aggressive expansion in this area. Most of the call focused on questions about prediction markets.

Robins' financial models assume the Supreme Court will issue a decision in mid-2028. The timing and outcome remain uncertain. In the base case, the company expects to recover the acquisition costs of prediction market customers won in 2027 in about 18 months. It was noted that if the court cancels sports event contracts under its default July 2028 schedule, this period would extend to about 41 months.

DraftKings reported $1.33 billion in revenue in the third quarter, an increase of 16% year over year. Even so, the company significantly lowered its 2026 earnings outlook due to higher spending on prediction markets.

The company plans to invest $650 to $700 million in prediction markets this year and $250 to $350 million in 2027. The previously announced investment was $300 million. Total adjusted EBITDA investment will be between $900 million and $1.05 billion. Robins argued that strong customer retention and trading volume justify accelerating the investment. It was stated that in October, annualized trading volume reached $56.8 billion, of which $10.1 billion was consumer volume and $46.7 billion was market maker volume.