DraftKings recently unveiled a new market-making division, DKeX, launching at an opportune moment for prediction markets. Although the NFL regular season is still months away, the introduction of this proprietary prediction market exchange coincided with the World Cup knockout stage, a significant event that could attract bettors. The company is enhancing its offerings with advanced pricing and algorithmic modeling through this internal market-making unit, aiming to capitalize on an exciting autumn sports calendar ahead.
Jason Robins, CEO of DraftKings, expressed strong optimism during the first-quarter earnings call, asserting that the company has the potential to rank among the top three market-makers globally in this emerging arena. He highlighted positive developments from an initial testing phase, particularly noting that DraftKings’ prediction market has recently surpassed $3 billion in annualized consumer volume. Additionally, Robins sees promising synergies from incorporating DraftKings Predictions into its newly developed “super app.” “DKeX provides a vertically integrated foundation for DraftKings Predictions, strengthening our prediction markets content and capabilities, giving us greater control over the technology that powers those offerings, and enabling us to move faster as we continue enhancing our unified app,” he stated.
However, the launch raises concerns about the company’s ability to generate sufficient trading fees to recoup the substantial investment required for prediction markets by 2026. DraftKings has already advised investors to brace for category losses up to $300 million this year, a figure some analysts describe as conservative.
DraftKings initially entered the prediction market landscape last December with its platform, DraftKings Predictions, which operates under regulation by the US Commodity Futures Trading Commission. Nevertheless, collaborations with the CME Group and Crypto.com have limited the company’s ability to generate revenue from trading fees, which are typically a significant revenue source for market-making firms. These firms earn revenue by collecting fees on trading volumes and by benefiting from the bid-ask spread of securities.
Most industry leaders rely on trading fees for revenue, while others are working to establish their own market-making divisions. In the spring, Polymarket introduced a new fee structure ahead of the NCAA Final Four, and Kalshi implemented a model designed to maximize liquidity, which charges market-makers significantly less than market-takers for executing trades.
In terms of DraftKings' fee structure, market-takers incur a fee ranging from $0.005 to $0.01 per contract, based on contract prices. For contract prices of $0.01 to $0.19, the fee is $0.01 per contract; for prices of $0.20 to $0.96, it is $0.02 per contract; and for prices of $0.97 to $0.99, it returns to $0.01 per contract. Market-makers are charged a fee of $0.0025 per contract.
Following the announcement of the new market-making division, DraftKings shares climbed 11% to about $27.59, though the stock remains significantly lower than its pre-Super Bowl prices in 2025, where shares traded in the low $50s. Despite this drop, some analysts anticipate that the launch of the exchange could initiate a rebound for the company.
Market-making is regarded as an attractive venture; analysts from Citizens have noted the potential for gross margins nearing 95%. The exchange launch could represent a key opportunity for DraftKings to improve its EBITDA over time, with Citizens projecting $243 million in total market-making revenue by 2027. While DraftKings has forecasted a $200 million to $300 million investment in prediction markets for 2026, Bank of America has indicated that losses might escalate to $550 million, as reported by Bloomberg.
As the year progresses, analysts consider 2026 a pivotal year for prediction markets. Recently, Kalshi announced plans for a new funding round, aiming for a valuation of $40 billion following its earlier $22 billion valuation this year. This surge in valuations has heightened discussions about potential mergers and acquisitions, with the emergence of integrated platforms like DraftKings’ new exchange creating a fertile ground for further M&A activity across exchanges, sportsbooks, and consumer-oriented firms, according to a note from Bernstein.
