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DraftKings and FanDuel Pour $300m+ Into Prediction Markets as Q1 Earnings Reveal Strategic Pivot

Both US sportsbook leaders made event contracts the centerpiece of their Q1 reports — even as 41 state attorneys general urge the CFTC to shut the model down.

Category: iGaming News - USA · By Growl Games Editorial Team · Wed May 13 2026 · Updated Thu Jul 23 2026

DraftKings and FanDuel Pour $300m+ Into Prediction Markets as Q1 Earnings Reveal Strategic Pivot

Table of Contents

Summary

The two dominant US online sportsbooks reported first-quarter 2026 results within 24 hours of each other this past week — Flutter Entertainment on May 6 and DraftKings on May 7 — and both used the moment to publicly commit to prediction markets as a core strategic pillar. Flutter is on track to invest up to $300 million in adjusted EBITDA losses on FanDuel Predicts this year. DraftKings has integrated its Predictions product into the flagship app, completed its acquisition of exchange platform Railbird, and told analysts it intends to become one of the "top two or three market makers in the world" in event contracts. The pivot lands while a bipartisan coalition of 41 state attorneys general is actively asking the Commodity Futures Trading Commission to confirm it has no jurisdiction over sports-related event contracts.

DraftKings Q1: Profit Inflects

DraftKings reported first-quarter revenue of $1.646 billion, up 17% year-on-year, with net income of $21.1 million versus a $33.9 million loss in the prior-year quarter. Adjusted EBITDA reached $167.9 million, up 64%, and adjusted diluted earnings per share rose to $0.20 from $0.12. Sportsbook revenue grew 24.1% to $1.095 billion despite handle increasing only 1.5% to $14.08 billion — sportsbook net revenue margin expanded 140 basis points to 7.8%, reflecting a shift toward higher-margin parlay and same-game-parlay product. iGaming revenue rose 8.9% to $461.3 million, now representing roughly 28% of group revenue. Monthly Unique Payers fell 4% to 4.2 million on the Texas lottery exit but rose 2% excluding that disposal, while average revenue per MUP climbed 21% to $131. DraftKings maintained full-year 2026 guidance of $6.5–$6.9 billion in revenue and $700–$900 million in adjusted EBITDA, and reported that prediction-market integration reduced customer acquisition costs by more than 80% in April.

Flutter Q1: US Margin Compression

Flutter Entertainment reported group revenue of $4.304 billion, up 17% year-on-year on the back of the Snai (Italy) and Betnacional (Brazil) acquisitions. Adjusted EBITDA increased 2% to $631 million, but net income fell 38% to $209 million and operating profit dropped 66% to $76 million on higher interest, depreciation, and investment costs. US revenue rose 6% to $1.763 billion but US adjusted EBITDA declined 26% to $119 million, with FanDuel Predicts investment and a $35 million Arkansas state-launch cost as the principal drags. FanDuel sportsbook AMPs were down 6% year-on-year and handle fell 9% as the company digested a smaller player base entering 2026, attributed to persistently high gross revenue margins on the 2025 NFL season that compressed customer activity. FanDuel iGaming AMPs rose 10% with revenue up 19%. Flutter trimmed its full-year 2026 outlook, citing unfavourable sports results and Arkansas costs, and announced a leadership reshuffle: Amy Howe departed as FanDuel CEO, Christian Genetski stepped up to lead the US business, and Dan Taylor was named President of Flutter overseeing FanDuel. Flutter also disclosed it has commenced a formal review of its London Stock Exchange listing that could result in a full delisting by end-June 2026.

The Predictions Strategy

FanDuel Predicts launched in December 2025 in partnership with CME Group. In Q1, the platform produced negligible revenue while Flutter spent approximately $40 million building it out; full-year EBITDA investment is expected to land near the top of the $250–300 million guided range. FanDuel widened its range of sports markets in March and April, launched the FanDuel One App in April that dynamically serves customers a sportsbook in regulated states and FanDuel Predicts in non-sportsbook states, and made sports-related prediction contracts available in 18 non-sportsbook states. Finance, economic, and commodity contracts went nationwide. DraftKings completed its acquisition of Railbird, the exchange platform, in October 2025 and has used Q1 to integrate Predictions into its Super App. CEO Jason Robins told analysts that the company intends to "establish a leadership position in Sports Predictions before year-end" and will launch a proprietary exchange and in-house futures commission merchant in Q2 2026.

Market Making as the Real Prize

Both companies emphasised market making as the more durable revenue model. Flutter began trialling market-making services in April on an unnamed major third-party prediction exchange, applying its in-house pricing engine to combo (multi-event) contracts and earning revenue from the spread. CFO Rob Coldrake had previously told a Morgan Stanley conference that market making is where "the majority of the margin lies." DraftKings is running market-making on Railbird and intends to scale rapidly. The strategic logic is the same on both sides: the core pricing infrastructure that supports parlay sportsbook margins translates directly to event-contract market making, and is independent of which retail prediction platform ultimately wins the race for consumers. Robinhood, meanwhile, has emerged as a third major channel — its "other transaction revenue" segment, primarily event-contract fees, generated $147 million in Q1 2026, up 320% year-on-year.

The State-Level Tension

The push lands awkwardly against a coordinated state-level pushback. On April 30, 2026, a bipartisan coalition of 41 state attorneys general — including New Jersey's Jennifer Davenport and Maryland's Anthony Brown — sent a formal comment letter to CFTC Chairman Michael S. Selig calling Kalshi- and Polymarket-style sports prediction contracts "unregulated sportsbooks" and asking the Commission to confirm via rulemaking that it lacks jurisdiction over sports-related event contracts. The Third Circuit affirmed a preliminary injunction in favour of Kalshi against New Jersey on April 6, holding the Commodity Exchange Act likely preempts state gambling enforcement on CFTC-regulated event contracts; a Tennessee federal court reached a similar conclusion in February. State-licensed sportsbook trade groups and prediction-market operators have so far argued opposite positions on whether event contracts constitute gambling under state law — but the Q1 results show that the two largest state-licensed sportsbook operators are now building the same infrastructure as the prediction markets their state-level allies are trying to block.

What It Means

The strategic case is straightforward: DraftKings and FanDuel cannot leave 33 sportsbook-illegal states to Kalshi, Polymarket, and Robinhood unchallenged, and the regulated nationwide perimeter of CFTC-designated contract markets gives them a route around the state-by-state licensing slog. The risk is regulatory tail: if the CFTC narrows the scope of "gaming" or carves sports event contracts out of permissible derivatives, the platforms and infrastructure both companies are now funding would be exposed. Both CEOs framed market making as the lower-risk path that survives in any rule outcome, because pricing-engine revenue is independent of who runs the retail front-end. For state-licensed operators, the Q1 prints confirm the iGaming model continues to scale faster than sportsbook in margin terms (DraftKings iGaming +8.9%, FanDuel iGaming +19%), while sportsbook growth is increasingly margin-led rather than volume-led. For offshore operators serving US users, the more relevant signal is that the regulated incumbents are now competing for retention and revenue per user, not gross customer counts — an environment in which the marketing intensity of US-facing affiliates and the structural cost discipline of offshore models will both matter more than they did 12 months ago.

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