Only two NFL Week 1 games have been played, but it’s already evident that the most bet-on sport in the U.S. is set to spark a surge in prediction market activity this season.
A recent report from Jefferies suggests that contract volume on DraftKings’ (NASDAQ: DKNG) DKeX and Crypto.com’s Nadex reached $42 million and $16 million, respectively, during the Super Bowl rematch between the New England Patriots and the Seattle Seahawks and the matchup between the Los Angeles Rams and the San Francisco 49ers.
“The Patriots-Seahawks session ranked as the 10th-highest volume day on record for prediction markets, trailing only select World Cup trading days and the prior Saturday’s NCAAF Week 1 slate,” writes analyst David Katz. “Looking ahead, we believe this weekend has the potential to set new industry volume records, with the first full NFL Sunday of the season positioned to be one of the largest trading days in prediction market history.”
Total prediction market volume across the 10 platforms monitored by Jefferies was $2.46 billion on Wednesday and $1.99 billion on Thursday.
NFL Season Could Be a Game-Changer for DKeX
DraftKings introduced DKeX, its proprietary prediction market exchange, in late June. The strong performance in the first two NFL games indicates that this season could be pivotal for the platform.
Jefferies estimates that DKeX generated $106,000 in market maker fees during the two games, potentially leading to revenue opportunities of up to $57 million for the season.
“Our estimate does not include potential trading profits or losses from DKNG’s market-making and risk-taking activities,” adds Katz. “Overall, we believe that exchange fees present a more consistent and predictable revenue opportunity, while market-making economics are subject to more variability based on spreads, inventory management, hedging, and event outcomes.”
Although DKeX’s volume currently lags behind established prediction market leaders, incremental progress on the DraftKings exchange could yield significant financial benefits.
Crypto.com Should Not Be Overlooked
Crypto.com’s Nadex experienced contract volumes of $35 million and $37 million on the Patriots/Seahawks and 49ers/Rams games, resulting in exchange fees of $42,000. Jefferies projects that the platform, which serves multiple prediction market operators, has a revenue opportunity of $5 million for this NFL season.
However, this estimate may be conservative as Robinhood Markets Inc. (NASDAQ: HOOD), a rapidly growing player in the prediction market industry, recently announced plans to channel “a selection” of football event contract volume through Crypto.com.
Robinhood is also securing equity stakes in both Crypto.com and the standalone OG.com prediction market.