Can These 3 Companies Turn the Prediction Market Sector Into Serious Profit?

Over the past year, prediction markets like Kalshi and Polymarket have received regulatory approval to offer sports-based prediction contracts. Following this, they have fast become key competitors to traditional sportsbooks.

Admittedly, concerns about prediction sites disrupting the likes of DraftKings (NASDAQ: DKNG) and Flutter Entertainment's (NYSE: FLUT) FanDuel have perhaps been overblown. According to sell-side analyst Citizens' Jordan Bender, the emergence of these platforms has so far resulted in a 5% decrease in overall betting handle for the legal, regulated U.S. sportsbooks.

Then again, as these platforms offer numerous advantages, the industry isn't sitting on its laurels. DraftKings and Flutter, as well as financial services company Robinhood Markets (NASDAQ: HOOD), have made big moves into prediction markets. Let's take a closer look at each competitor and determine whether this pivot will prove profitable.

Image source: Getty Images.

DraftKings' prediction push could benefit the company in two ways

On Dec. 19, DraftKings launched its DraftKings Predicts platform. This recent pivot stands to benefit the company in two separate ways. First, with DraftKings Predicts, the company can enter markets where sports betting is not yet legal, such as California and Texas.

Second, by launching this platform in these states, the company can demonstrate to state lawmakers how much potential tax revenue they are forgoing. This could fast-track legalization in these states, as those who have previously signed up for DraftKings' predictions platform open accounts on its sports wagering platform.

DraftKings' strategy has already resulted in a partial rebound for shares. A further recovery may be in store in 2026.

Flutter Entertainment has a similar plan up its sleeve

U.K.-based online gambling giant Flutter Entertainment has also entered the U.S. prediction markets space. Through a partnership with CME Group, Flutter has launched FanDuel Predicts in five U.S. states, with plans to expand nationwide throughout the year.

Flutter is likely taking the same approach with the prediction markets that DraftKings is taking. That is, using it as a platform to penetrate the market in states where traditional sports betting is not yet legal.

That's not all. Flutter and DraftKings are likely launching prediction market platforms for another reason: to assuage concerns about declining market share. Assuaging concerns could lead to significant valuation expansion for sports betting stocks. A year ago, Flutter was trading at a forward price-to-earnings (P/E) ratio in the high-20s, whereas now, it's trading for less than 19 times forward earnings.

Prediction markets could get Robinhood stock back on track

After a strong performance throughout most of 2025, Robinhood Markets' stock has struggled in more recent months, largely due to increasing concerns about a growth slowdown. As I discussed recently, Robinhood reported a big drop in stock and crypto trading volumes in November.

If this marks the start of a trend, it may have a further impact on Robinhood's valuation. That said, some growth catalysts may help to counter this potential risk. Robinhood's ongoing move into the prediction markets is a key example.

Robinhood's prediction market platform debuted during Q1 2025, and by Q3 2025, prediction market trading was generating around $100 million in quarterly revenue for Robinhood. With the recent launch of contracts similar in nature to prop and parlay bets, this segment could become an even larger portion of the company's overall business.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool recommends CME Group and Flutter Entertainment Plc. The Motley Fool has a disclosure policy.