With DraftKings launching its prediction market app Friday and FanDuel expected to follow soon, a Wall Street analyst said it’s clear that neither company is worried about putting their state gaming licenses at risk. However, investors are cautious for now.
In a note to investors, Barry Jonas of Truist Securities reviewed DraftKings’s launching its app Friday in 38 states, including California, Florida, Georgia, and Texas. He also suggested that FanDuel’s launch is “imminent.”
“Both appear comfortable proceeding without putting their core state gaming licenses at risk,” Jonas said. “With multiple court cases outstanding, we likely haven’t heard the last on the matter, with a Supreme Court showdown likely, in our view. We think both DraftKings and Flutter (Fan Duel’s parent) can outperform as there is clarity — either banning or proceeding with sports contracts — though admittedly, there are multiple and sizable risks along the way. That perhaps somewhat explains why the stocks haven’t moved much.”
DraftKings Prediction, which falls under the oversight of the Commodities Futures Trading Commission, offers contracts on sports and finance with such additional categories as entertainment and culture, expected later, Jonas said. Going live in California, Florida, Georgia, and Texas gives DraftKings access to an additional 30% of the U.S. population. It’s available for those 18 and above.
“DraftKings plans to connect to multiple exchanges, beginning with CME Group, and includes the rollout of Railbird to broaden available markets and deliver advantaged economics over time,” Jonas wrote. “DraftKings has extended its responsible-gaming practices to prediction, emphasizing education and awareness and allowing for deposit limits and self-exclusion.”
While Flutter hasn’t launched a competitive prediction product, Jonas said they’d expected FanDuel to launch ahead of DraftKings. “We expect FanDuel Predicts launch to be imminent. We note Fanatics launched their prediction offering in 24 states over two weeks ago.”
But with multiple court cases looming, there are clear risks for DraftKings and Flutter, Jonas noted. Both believe they’re not putting their online sports betting state licenses at risk, despite that being the case in Nevada, where Flutter withdrew its license and DraftKings its application based on their intention of going into the prediction market business.
“We see an eventual Supreme Court showdown with the best case mid-2026 timing, though some congressional fix is also possible though less likely between the two in our view,” Jonas said.
Putting aside the scale of investment and ROI for now, Jonas outlined a few near to mid-term scenarios.
Scenario 1: If sports contracts emerge after all that, Jonas thinks DraftKings and Flutter could be well positioned to be market leaders, while the case for more states to legalize online sports betting and perhaps igaming increases.
Scenario 2: If sports contracts are banned, DraftKings and Flutter go back to their prior online sports betting oligopoly positioning. They hopefully limit the amount of sports prediction-related spend and losses and likely see upside, as long as there are no sizable fines or other “bad-actor” ramifications.
Scenario 3: As they await legal clarity, the risk is that in the interim, other sports prediction offerings with access to more states, such as Kalshi, Robinhood, and Coinbase, gain more market share.
“At the same time, it’s possible that DratKings and Flutter sports prediction products need to exit more states that clarify they view sports prediction markets illegal, especially if more existing online sports betting regulators take a harder view,” Jonas said.
In his fourth-quarter online sports betting overview, Jonas said the numbers “feel much better” during the holiday season compared to unfavorable NFL results last year. October handle and revenue tracked up 15% and 50% year-over-year, factoring a hold of 9.2%. November is also favorable, with handle and revenue up 10% and 19% on hold of 11.7% with about 50% of results reported.
“We believe Thanksgiving and Black Friday NFL action played out favorably for operators, given all three underdogs won outright on Thanksgiving, along with the underdog on Black Friday,” Jonas said.
Truist moved DraftKings’s price target to $43 from $45, while Flutter was lowered to $280 from $305. Both remain Buy-rated.
