DraftKings recently launched a market-making division at an opportune moment for prediction markets. While the NFL season is still months away, the introduction of DraftKings' proprietary prediction market exchange, DKeX, aligns with the World Cup knockout stage. This initiative is backed by sophisticated pricing and algorithmic modeling, positioning DraftKings to deepen its prediction market offerings ahead of the fall sports calendar.
Jason Robins, DraftKings' CEO, expressed excitement during the company’s first-quarter earnings call, stating that DraftKings could potentially rank as one of the top three market-makers in the sector. He is encouraged by the progress the company has made during the initial testing phase, particularly as the prediction market recently exceeded a notable benchmark by reaching $3 billion in annualized consumer volume. Robins sees synergies from integrating DraftKings Predictions, the firm’s prediction market division, into their newly launched “super app.” He stated, "DKeX provides a vertically integrated foundation for DraftKings Predictions, strengthening our prediction markets content and capabilities and giving us greater control over the technology that powers those offerings."
Despite these advancements, concerns linger about DraftKings' ability to secure sufficient trading fees to recoup the significant investments being made into prediction markets by 2026. The company has warned that these investments could lead to category losses of up to $300 million this year—a figure some analysts consider conservative.
DraftKings first entered the prediction market sector last December with the launch of DraftKings Predictions, which is regulated by the US Commodity Futures Trading Commission. However, partnerships with the CME Group and Crypto.com have limited the company's access to a significant revenue source through trading fees. Market-makers typically earn revenue from exchange fees based on trading volume and by capitalizing on the bid-ask spread.
Most leading companies in the industry generate revenue through trading fees, while others are beginning to establish their own market-making divisions. In the lead-up to the NCAA Final Four earlier this year, Polymarket unveiled a new fee structure for its maker-taker model, while Kalshi employs a strategy aimed at maximizing liquidity. Under Kalshi's model, limit orders for market-makers incur costs significantly lower than those for market-takers.
DraftKings’ fee structure has been outlined as follows:
– Market-takers: $0.005 to $0.01 per contract, based on contract price
– Contract price: $0.01 to $0.19: $0.01 per contract
– Contract price: $0.20 to $0.96: $0.02 per contract
– Price of the contract: $0.97 to $0.99: $0.01 per contract
– Maker fee: $0.0025 per contract
Following the announcement of DKeX, shares of DraftKings rose by 11%, reaching around $27.59 each. Despite this increase, DraftKings remains significantly lower than its post-Super Bowl trading levels in 2025, which were in the low $50s. Still, some analysts believe DraftKings might be on the cusp of a recovery fueled by the new exchange.
Market-making is often perceived as a lucrative venture; Citizens analyst Jordan Bender noted that gross margins could be as high as 95%. The establishment of the exchange could provide a significant opportunity for DraftKings to enhance its long-term EBITDA, with Citizens projecting $243 million in total market-making revenue by 2027. DraftKings has forecasted its investments in the prediction market to reach between $200 million and $300 million in 2026, whereas Bank of America estimates potential losses could climb to $550 million, as reported by Bloomberg.
As the year progresses, analysts regard 2026 as a critical year for prediction markets. Recently, Kalshi announced its pursuit of a new funding round, which could give the company a valuation of $40 billion, following a recent $22 billion valuation this year, which had already doubled what it achieved in 2025.
These booming valuations across the industry have also sparked speculation about potential mergers and acquisitions. Bernstein noted that the launch of integrated platforms like DraftKings’ new exchange has set the stage for increased activity in mergers across exchanges, sportsbooks, and firms targeting consumers.
