DraftKings CEO doesn’t know why his stock loves bad prediction market news. Wall Street says it’s rational
DraftKings CEO Jason Robins has repeatedly expressed his excitement about prediction markets. The stock doesn’t reflect that. Following the 9th U.S. Circuit Court of Appeals ruling last month, which was a massive regulatory blow for prediction markets, shares for DraftKings and Flutter popped more than 7% and over 6% respectively. The ruling stated sports related events contracts on prediction markets were not swaps and could not be overseen by the Commodity Futures Trading Commission. The regulator argues all event contracts are swaps and thus, fall under its jurisdiction. How DraftKings shares respond to the heated regulatory brawl between states and the CFTC is not reflective of the company’s opinion on prediction markets, Robins told CNBC on Sept. 10. He reiterated this message at the Front Office Sports’ Asset Class event last week, calling it a “disconnect” that one of the largest global sports operator’s shares have slid from optimistic headlines on prediction markets. The company launched its proprietary prediction markets exchange, called DKeX, in late June. Analysts and investors, however, view the stock response as reasonable for one reason: DraftKings’ revenue driver remains its sportsbook. “The markets are being completely rational,” said Joel Shulman, CEO of investment firm EntrepreneurShares. “Investors are responding to the current business [DraftKings] is in, not the one they’re moving into.” DKNG 1Y mountain DKNG 1yr chart DraftKings shares have fallen nearly 50% over the past year and over 16% in the past month. Those post-prediction market ruling pops didn’t hold up either. Analysts say until there are clear guidelines on who can regulate prediction markets — possibly from the Supreme Court — DraftKings could be susceptible to headline volatility in the short term. Bernstein’s Ian Moore shared Shulman’s perspective but added investors have not considered the possible opportunities DraftKings’ prediction exchange has when trading. The analyst pointed to data that shows DKeX ranked third for total share of prediction markets volume last week, with Polymarket and Kalshi leading by a wide margin. “Investors have fully discounted the risk from prediction markets in DraftKings’ stock price but have not discounted the opportunities,” he said in a note. citing market making and access to states where sportsbooks are banned as potential benefactors. Moore calculated that consumer volume for DraftKings’ predictions platform could reach $1 billion by December, about 9% of DraftKings’ current market capitalization. For now, Bernstein is eyeing how DKeX performs for football and the upcoming basketball and ice hockey seasons approaching in a few weeks. These couple months to the end of 2026 will test whether DKeX can bite volume off the main prediction market competitors. “Sustainability of [DKeX] through the fall is going to be huge,” Moore said. “Around December, you’ll have a good idea of how sustainable that growth has been.” The analyst has an outperform rating on the stock. His price target of $29 implies upside of 32% from Monday’s close. Disclosure: CNBC and Kalshi have a commercial relationship that includes customer acquisition and a minority investment.
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