Updated November 6, 2026
The financial figures and company forecasts are supported by DraftKings' November 5 earnings release and Q3 business update. The earlier investment estimate is confirmed in its August earnings call.
DraftKings is spending considerably more than planned to establish itself in prediction markets. On November 5, the company revealed that its investment in the business could reach $700 million this year, more than double what it expected just three months ago.
The increased spending has forced DraftKings to lower its 2026 earnings forecast substantially. But the company isn't backing away. It expects prediction markets to generate around $700 million in revenue next year, although turning that revenue into profit will take longer.
For now, DraftKings is spending heavily to compete with Kalshi and Polymarket, hoping the investment will pay off over the next few years.
In August, DraftKings expected to invest between $200 million and $300 million in its Predictions business during 2026. That figure has now increased to between $650 million and $700 million, according to its November 5 financial results.
The figures refer to the expected impact on adjusted operating earnings, rather than a separately disclosed cash expenditure.
The increase is significant enough to affect the company's overall financial outlook. DraftKings previously expected adjusted earnings of $700 million to $900 million for 2026. That forecast has now fallen to between $175 million and $275 million.
The company's existing business continues to generate revenue. DraftKings reported $1.33 billion in third-quarter revenue, an increase of 16% compared with the same period last year.
However, expanding into prediction markets is proving expensive, particularly when it comes to attracting new customers.
DraftKings expects its Predictions business to contribute very little net revenue this year because promotions and incentives will offset most of the money it generates.
The company believes its early results justify the increased investment.
More than 1.6 million customers have used DraftKings Predictions in 2026. DraftKings also claims that DKeX, its own prediction-market exchange launched in June, has already become the third-largest exchange by total trading volume.
Operating its own exchange gives DraftKings greater control over its products and allows it to retain more of the revenue from transactions handled through its platform.
But the real test comes next year.
DraftKings expects Predictions to generate between $650 million and $750 million in revenue during 2027. That's a considerable jump from the relatively insignificant net revenue expected this year.
There's an important distinction, though. Revenue isn't the same as profit.
Even with those projected sales, DraftKings expects Predictions to reduce its adjusted earnings by another $250 million to $350 million in 2027.
In other words, the business is expected to generate considerably more revenue next year, but it will still cost DraftKings more to operate and expand than it contributes to adjusted earnings.
The company expects that situation to improve in 2028, when it forecasts Predictions will begin making a positive contribution.
DraftKings is entering a market where Kalshi and Polymarket have already established themselves, and attracting customers comes at a cost.
The company believes its investment will eventually pay off as customers continue trading and promotional spending decreases. It estimates that customers acquired during 2026 will generate enough returns to recover their acquisition costs in approximately 20 months.
That estimate depends on customers remaining active after the initial promotions end.
Regulation is another concern. Several states are challenging sports-related prediction markets, while the CFTC continues to argue that federally regulated exchanges should operate under a national framework.
DraftKings acknowledges that regulatory developments could affect its expansion plans.
For now, the company is paying a substantial price to establish itself in prediction markets before competitors become even harder to challenge.
The next year will provide a clearer picture of whether that strategy is working. If DraftKings can generate the revenue it expects while reducing promotional spending, the investment could prove worthwhile.
If customers disappear when promotions end, or regulatory restrictions limit access, the road to profitability becomes considerably more difficult.
Editor's notes
“I think there's another way to look at this investment. DraftKings isn't necessarily spending $700 million just to compete with Kalshi and Polymarket. It's also protecting its existing business. If prediction markets continue growing and start taking a bigger share of the sports betting market, DraftKings could end up losing customers to these platforms. By building its own prediction-market business, the company is effectively hedging against that possibility. It's a costly strategy, but I can see the logic. If prediction markets become a serious competitor to traditional sportsbooks, DraftKings would rather be part of that growth than watch it happen from the sidelines.”
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