DraftKings Launches Prediction Markets: Analysts Eye 30% Upside

Over the past three years, sports betting stock DraftKings (NASDAQ: DKNG) has delivered for investors, with shares up over 200% through the Dec. 29 close in that period. 

But in recent months, the emergence of prediction markets has weighed on sentiment, as investors fear that emerging competition could draw DraftKings' customers elsewhere.

Financial services company Robinhood Markets (NASDAQ: HOOD) has helped popularize prediction markets for mainstream retail traders, aided by its partnership with Kalshi, making it a standout competitor to DraftKings.

But DraftKings isn’t taking this threat sitting down.

On Dec. 19, the firm announced the launch of its own prediction market platform, DraftKings Predictions. Below, we’ll dive into the prediction market drama surrounding the firm and provide perspective on the stock's outlook. 

DraftKings Expands Addressable Market With Predictions Platform

Investor confidence in DraftKings took a huge hit on Sept. 30. That day, shares dropped nearly 12%. This came as Robinhood CEO Vlad Tenev announced that users traded over 2 billion prediction event contracts on its platform in Q3. Additionally, Kalshi began offering parlay-style bets on NFL games, directly targeting one of DraftKings’ most important revenue streams. Overall, DKNG shares are down more than 19% since these announcements.

Investors are very concerned about this, and it's understandable why. Increased competition isn’t good for established players like DraftKings. This is especially true when gamblers can easily switch to other platforms. However, DraftKings isn’t simply playing defense as it moves into prediction markets; it's greatly expanding the customer base that it can reach. Through prediction markets, the company will be able to offer event contracts in 38 states. That is significantly more than the 26 U.S. jurisdictions where the company offers online sports betting.

The company will offer event contracts, including sports event contracts, in California, Texas, and Florida. These are the three most populous states in the country, accounting for more than a quarter of the United States’ total population. These states alone mark a substantial set of customers that DraftKings simply couldn’t reach before. DraftKings will compete with Kalshi, which started offering sports trading to all 50 states in January. However, DraftKings’ strong brand recognition among sports bettors should give it an excellent shot at winning market share.

Wall Street Analysts See Solid Upside in DKNG Shares

Currently, the consensus price target on DraftKings sits at just over $47 per share. This figure implies approximately 36% upside versus the stock’s Dec. 29 closing price. 

That support matters, but it doesn’t remove execution risk. For 2026, investors should watch the company's earnings updates for practical signals—how much revenue prediction markets generate, and how traditional sportsbook engagement holds up in core states. If DraftKings can demonstrate strength in its new prediction markets offering while maintaining its historical market share, the narrative could flip quickly. 

Potential Legal Challenges Are a Double-Edged Sword

By entering prediction markets, DraftKings is wading into uncertain legal and regulatory waters. Nevada, New Jersey, Maryland, and other jurisdictions have already made efforts to block Kalshi from offering prediction markets in their states. 

If legal issues hurt the return on DraftKings' investment in prediction markets, it will likely hurt Kalshi and other competitors as well, potentially lifting the overhang on DraftKings shares. Since DraftKings' prediction markets platform has just launched, legal challenges are likely to impact it less than those faced by earlier entrants.

DraftKings is making a logical move by entering prediction markets. It helps fend off its fast-moving competitors and creates a path to reach customers in large states where it previously had no reach. Should legal issues arise, it seems likely that DraftKings would come away less damaged than its competitors, such as Kalshi.

Clearly, investors will have to see how much adoption DraftKings' prediction markets platform generates. This could make the company’s earnings releases in 2026 among the most critical in its history. However, with shares down significantly and with the opportunity to reach many new customers, the stock has a real chance to succeed in 2026.

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