DraftKings stock fell to its lowest level in more than three years Thursday, extending a selloff amid disappointing earnings, competition from prediction markets and scrutiny of its gambling practices.
DraftKings shares fell as low as $18.58 Thursday after closing Wednesday at $19, their lowest close since April 2023, on slightly above-average trading volume. The stock has lost roughly half its value over the past year, as it faces slowing sportsbook growth, rising costs and increased competition from prediction markets like Kalshi and Polymarket.
Similar pressures have weighed on longtime rival FanDuel‘s parent, Flutter Entertainment, whose stock also fell to record lows this week.
DraftKings earnings add to concerns
Robins said sportsbook handle grew 15% year over year during the first three weeks of September, offering a more encouraging outlook after a disappointing second quarter, at the Wells Fargo Consumer conference last month.
DraftKings missed Wall Street revenue estimates as revenue fell largely due to bettor-friendly results and increased promotional spending. It also reported a $67.6 million net loss after posting a $157.9 million profit a year earlier. DraftKings has maintained its core sportsbook business remains on track to generate roughly $1 billion in adjusted EBITDA this year.
The early NFL-season growth has yet to reverse the stock’s decline, however, as investors weigh the company’s profitability and the costs of expanding into prediction markets, which DraftKings plans to spend an additional $200 million to $300 million this year.
Prediction markets add to pressure
DraftKings has struggled to gain ground against Kalshi and Polymarket since entering prediction markets last year. It launched its own exchange, DKeX, in June to reduce reliance on third parties.
Robins said last week that DraftKings was approaching a double-digit share of sports prediction-market volume, after reporting nearly fivefold growth in annualized trading volume from April to July.
Still, Needham estimated Kalshi accounted for 76% of sports prediction-market volume during the NFL’s opening week, compared with roughly 3% for DKeX, excluding trades routed through other exchanges.
Robins has maintained that prediction markets have had little impact on DraftKings’ sportsbook business, even as its shares have repeatedly fallen on headlines seen as favorable to the industry.
“We see a headline that is positive on predictions, and everyone in the company [celebrates] and our stock goes down. Or we see like the Ninth Circuit rules against predictions, and we’re like, ugh, and the stock pops,” Robins said at Front Office Sports’ Asset Class conference in New York last month.
Scrutiny from more headlines
DraftKings faces additional scrutiny following a New York Times investigation last month alleging the company used artificial intelligence to target promotions toward customers likely to lose money while shelving similar technology designed to identify problem gambling.
DraftKings has disputed the findings and denied making its products more addictive.
The Massachusetts Gaming Commission has since begun reviewing how DraftKings and other sportsbooks use AI. A proposed class-action lawsuit filed Wednesday in Massachusetts federal court also seeks relief for the company’s alleged targeting of vulnerable gamblers via AI.
