It’s the oldest trick in the book: If you can’t beat ‘em, join ‘em. But despite their much-heralded move into the Prediction Markets space, iGaming heavy-hitters DraftKings and FanDuel are facing an existential crisis from sliding stock value, triggered by the hot, competitive breath of Kalshi, Polymarket and all the other New Wave iGaming (NWiG) disruptors.
The value of DraftKings shares, for example, has fallen by nearly 14 percent in recent days, despite a perfectly reasonable FY25, which may have been a little off-target but still saw 2025 Q4 revenue rise by an impressive 43 percent, compared to the same quarter the previous year.
By close of play at the end of last week, DraftKings shares were down 13.51 percent to 21.76 USD on the Nasdaq; while shares in FanDuel parent, Flutter Entertainment, were down 11.46 percent to 127.17 USD on the NYSE.
The Deal
What’s the deal, one may well ask?
Well the money markets can smell the fear and clearly see the coming threat of binary yes/no traders, prediction marketeers, who remain unshackled by state gambling regulations and state taxes because they’re overseen by the federal U.S. Commodity Futures Trading Commission (CFTC).
By the end of last year, DFS and online sports betting pioneers FanDuel and DraftKings had both tried to turn the narrative and catch the New World iGaming (NWiG) zeitgeist.
They abandoned their affiliation with the premier American Gaming Association (AGA), which represents the wider U.S. gambling industry, and launched their own prediction market apps, FanDuel Predicts and DraftKings Predictions.
Latent
But the FanDuel and DraftKings entry into the space is seen by many observers to be belated and clunky.
For while the duopoly has been struggling to catch up, prediction markets originators, such as Kalshi, Polymarket and Robinhood, have surged with billion dollar investments and close relationships with the Trump administration, even the U.S. president’s own son, Donald J. Trump Jr, who is a strategic advisor–and investor–in both Kalshi and Polymarket.
FanDuel and DraftKings have been seeking affiliation and alliances with other NWiG players, be they Chicago-based, Google-backed futures and derivatives exchange, CME Group; cryptocurrency-powered Crypto.com, or mainstream establishment broadcasters like CNN and ESPN.
But the volume, weight and value of wagering on NWiG sites is now seriously threatening the dominance of the major 2018 post-PASPA sportsbooks.
Exponential Growth
According to latest financial estimates, prediction markets delivered around US$1.3 billion (£950m) in sports bets–alone–last year in the United States – equivalent to almost a quarter of DraftKings’ total revenue.
And again focussing on Kalshi, perhaps the best known of the prediction markets, their MAUs (Monthly Active Users) have exploded from 600,000 to 5.1 million punters in little over a year.
Facing this NWiG surge, both DraftKings and FanDuel’s owner Flutter Entertainment have lost half their market value in the last year.
Prediction markets are now poised to storm the last two great citadels that have yet to fall to online sports betting – California, which is dominated by Tribal gaming compacts, and Hold’em Texas.
Yet arguably the greatest block to the relentless rise of prediction markets comes not from the combined regulatory power and financial muscle of the mainstream gambling establishment but from within.
Insider Trading
Following highly-publicised cases of alleged insider trading–over a dodgy US$400,000 payout on the timing of the kidnapping of Venezuelan strongman Nicolás Maduro and the dates of U.S. and Israeli air attacks on Iranian nuclear facilities last June–, calls are now growing for the hitherto all-powerful prediction markets to be brought to regulatory heel.
An arrest in the Venezuela case has yet to be made, but on Thursday Israeli law enforcement took two of their own Shin Bet secret service agents into custody and charged them with insider trading on Polymarket and illegally winning US$150,000 (£109,890).
Meantime, the CFTC’s new Chair Michael S. Selig has announced “a reset of the regulatory landscape for prediction markets, or ‘event contracts’ as we call them here”.
Innovation
“It is time for clear rules and a clear understanding that the CFTC supports lawful innovation in these markets,” said Selig, announcing a four-step review of prediction market legislation.
We–and no doubt much of mainstream iGaming, particularly DraftKings and FanDuel–await the CFTC’s conclusions with great interest.
Watch this space!
