Published on: October 6, 2025, 02:03h.
Updated on: October 6, 2025, 02:03h.
- DraftKings exploring multiple avenues for prediction markets; potential developments expected soon, according to Jefferies analyst.
- State regulators play a crucial role in this scenario.
As DraftKings (NASDAQ: DKNG) shares have plummeted 16% in the past week, and with disappointing September betting outcomes raising concerns, investors are rightfully wary of the future for this beleaguered gaming stock.
In light of the competitive pressures posed by Kalshi and other emerging prediction markets, many analysts believe that fears regarding their impact on sports betting stocks may be overstated. Nonetheless, investors are eager for DraftKings to clarify its strategy, especially as Kalshi refines its football parlay offerings.
“DraftKings is preparing for entry into prediction markets; our impression is that a variety of strategies are being considered that could take shape promptly if state regulatory bodies permit,” comments Jefferies analyst David Katz.
In his latest report, Katz maintained a “buy” rating on DraftKings while adjusting his price target from $54 to $51, removing the stock from Jefferies’ Franchise Picks list. The updated target suggests a significant upside of 44% based on the stock’s closing price on Friday, October 3.
Risks Associated with Prediction Markets for DraftKings
While speculation abounds, including rumors of potential acquisitions, DraftKings’ approach to entering the prediction market isn’t as straightforward as simply acquiring an event contract business or expanding its own operations.
Unlike platforms like Kalshi and Polymarket, DraftKings and similar online sportsbooks are subject to state-level regulations, with several states already cautioning gaming companies about entering the prediction market arena. Regulatory bodies such as the Arizona Department of Gaming (ADG), Michigan Gaming Control Board (MGCB), and the Ohio Casino Control Commission (OCCC) have all warned that pursuing prediction market strategies could endanger existing sports betting licenses.
Despite the ongoing buzz and reactions from the stock market regarding prediction volume, some sell-side analysis suggests that the volume of event contracts in football will fall significantly short compared to the regulated sportsbook handle this season, indicating that the potential benefits of prediction markets might not outweigh the risks for DraftKings and its competitors.
DraftKings Faces Challenges with Prediction Markets
Market experts note that the rise of prediction markets places online sportsbook operators, notably DraftKings, in a challenging position. Pessimistic perspectives on the stock highlight the growth of prediction markets and DraftKings’ limited ability to respond due to the aforementioned regulatory risks.
On the other hand, DraftKings’ cautious approach could yield long-term benefits by ensuring compliance in older markets while avoiding regulatory complications in critical jurisdictions where sports betting is not yet legalized, such as California.
Ultimately, to counter its recent stock challenges, DraftKings would benefit from a shift in betting luck for the NFL and effectively utilizing its buyback program to acquire shares at current attractive prices.