Key Moments:
- Analyst estimates DraftKings (NASDAQ: DKNG) and FanDuel (NYSE: FLUT) could address a $5 billion US prediction markets opportunity
- Projection is split between $4.4 billion in sports-only contracts and $600 million in non-sports derivatives
- Analyst expects both companies to launch their prediction markets in the coming months
Market Opportunity Assessment
Macquarie analyst Chad Beynon reports that DraftKings and FanDuel could tap into a $5 billion total addressable market for US prediction markets. The forecast relies on $4.4 billion in sports-only event contracts and $600 million in non-sports yes/no derivatives, and Beynon expects both companies to introduce their prediction market products soon.
Beynon notes that the sports-only TAM for US prediction markets is projected to be about 25% lower than online sports betting, due to fewer betting options and reduced promotional spending.
Volume and Revenue Estimates
Beynon offers another view on future sports prediction volume growth. He suggests annualizing the weekly $1.3 billion estimate—mostly from states without legal online sports betting—and adjusting it by a 1.38 factor to account for NFL-season inflation. Beynon expects DraftKings’ and FanDuel’s non-sports prediction offerings to reach volumes about 70% lower than their sports-focused products. This points to a broader product mix compared to Kalshi, which is estimated at 90% sports, but less diversified than Polymarket at 33% sports.
| Category | Estimated TAM | Take Rate | DKNG Revenue | FLUT Revenue |
|---|---|---|---|---|
| Sports-Only Contracts | $4.4 billion | 4.7% | – | – |
| Non-Sports Yes/No Derivatives | $600 million | 2% | $45 million | $67 million |
Competitive Landscape
DraftKings and FanDuel hold leading positions among US sportsbook operators, but they remain relatively new to the event contract space. This may limit their ability to challenge early market leaders such as Kalshi and Polymarket right away. Beynon comments, “For US sports-only Prediction markets, we conservatively assume slightly higher market shares for Kalshi/Robinhood/Polymarket given first mover advantage,” and notes, “We believe the ‘big Five’ Prediction platforms will be: DraftKings, FanDuel, Kalshi, Polymarket, and Robinhood. Assuming a 4.7% take rate on volumes, we arrive at a near-term TAM of nearly $4.4 billion (only non-legal OSB states).”
Sports betting, particularly around the NFL, has contributed to the rising activity on platforms like Kalshi. However, the scope of event contracts goes beyond sports, encompassing areas such as electoral politics, cryptocurrency, and more. This trend presents new revenue opportunities for DraftKings and FanDuel. However, Beynon expects the scale to fall short of his $700 million sports-only estimate.
Beynon states, “For the US non-sports Prediction market, we assume volumes will be ~30% of sports betting contracts,” and continues, “We think this is appropriate given that this TAM only includes non-legal OSB states, resulting in a much higher percentage of sports volumes as the ‘go to’ sports betting product in the state. With a 2% take rate, Beynon estimates a near-term TAM of nearly $600 million in non-legal OSB states. At 8% and 12% market shares, DraftKings and FanDuel would generate about $45 million and $67 million in revenue.”
Investor Outlook and Risks
Beynon argues that recent declines in DraftKings and Flutter shares may be exaggerated. He believes investors overreacted to prediction market concerns. Other factors, including continued weak margins on NFL games and investor disappointment with the companies’ 2025 performance, have also contributed to share price pressures. Beynon adds, “Under this scenario, one would have to assume that 100% of US states legalize OSB and DKNG/FLUT are not permitted to offer Prediction markets in any US state given state regulators,” concluding, “Further, one would have to assume a cannibalization rate of ~40% to justify the ~$10bn of market value destruction for DKNG and a much higher rate for FLUT in order to warrant the $20bn loss of market cap.”
- Author
Daniel Williams
