DraftKings CFO Alan Ellingson told investors at MoffettNathanson’s Media, Internet & Communications Conference on Thursday that the company’s prediction markets platform represents one of the biggest future opportunities in its portfolio, even as the business absorbs a significant near-term EBITDA hit.
Sportsbook Solid, Predictions Ahead
Ellingson described DraftKings’ core sportsbook as operating in “fantastic” condition before turning investor attention to DraftKings Predictions, the platform the company launched in December 2025.
“We see Predictions as a monstrous opportunity,” Ellingson said, pointing to the company’s existing expertise in sports betting and online gaming as the foundation for building out the product.
DraftKings had already warned investors that spending tied to prediction markets would reduce 2026 adjusted EBITDA by between $200m and $300m. Executives are now making the case that the drag is worth absorbing.
Prediction markets allow users to trade on the outcomes of future events — a product that operates under different regulatory frameworks than traditional sports wagering in certain jurisdictions, creating both commercial opportunities and legal grey areas. Regulators across multiple markets are still working out how to classify and govern the product, with no settled consensus on whether existing gambling statutes apply.
The Super App Rationale
Ellingson’s case to investors centred on DraftKings’ “super app” approach: a single platform combining sportsbook, gaming, and prediction products. The company argues this lets it cross-market to a customer base that already treats these products with a similar mindset, reducing acquisition costs and increasing lifetime value per user.
California was cited as the clearest illustration of the commercial logic. Sports betting remains illegal in the state, but prediction markets are currently permitted, giving DraftKings access to a market it has been locked out of. For an operator that has invested heavily in US market expansion, California represents a meaningful addressable audience with no meaningful sportsbook competition.
Beyond reach, the company believes prediction markets could eventually generate higher profit margins than conventional sportsbook operations, primarily because they carry lower operating costs. That argument may carry weight with investors who have questioned the pace of spending relative to earnings. DraftKings reported its best-ever quarter in Q4 2025 on revenue, yet the stock fell on guidance — a dynamic that reflects ongoing investor scrutiny of the cost base.
Analyst Backing and a Crowded Field
Macquarie analyst Chad Beynon said earlier this month that DraftKings has delivered one of the most significant structural growth trends in the gambling industry in recent years, attributing much of the momentum to its focus on prediction markets.
The product category has drawn growing attention from both US operators and financial platforms alike. Kalshi raised $300m and expanded to more than 140 countries, becoming one of the most prominent dedicated prediction markets operators, while reporting $1bn in Super Bowl LX trading volume in February 2026. Competition in the space is developing quickly, and DraftKings is entering it against rivals with earlier starts and different cost structures.
The regulatory picture adds further uncertainty. Massachusetts has already moved against prediction markets operators over sports event contracts, and several states are actively reviewing how gambling statutes apply to the product. DraftKings itself has federal approvals in place, but the patchwork of state-level rules means the addressable market could shrink or expand depending on how legal challenges resolve.
Ellingson’s conference remarks signal that DraftKings is committed to absorbing the near-term EBITDA cost while it builds scale. How quickly the platform reaches profitability — and whether the regulatory environment holds — will determine whether the investment case holds up through the remainder of 2026.
Source: GamblingNews
