DraftKings and FanDuel are on pace to absorb more than $500 million in combined adjusted EBITDA losses this year while funding their expansion into sports prediction markets, according to figures discussed in connection with both companies second-quarter 2026 earnings, as the two operators race to establish a position ahead of the NFL season. PENN Entertainment chief executive Jay Snowden characterized the coming spending as very aggressive, irrational, warning of an arms race among operators as football approaches.
The buildout responds directly to Kalshis rise as the leading standalone prediction-market operator. Kalshi has used its CFTC-regulated derivatives structure to offer sports-outcome contracts in states where traditional sports betting remains restricted or heavily taxed, sidestepping state-by-state licensing regimes that have long constrained DraftKings and FanDuels growth. DraftKings reported that prediction-product volume rose nearly fivefold between April and July, with more than 600,000 customers using the feature through the first half of 2026, while FanDuel — a Flutter Entertainment subsidiary — is projecting roughly $50 million in prediction-market-making revenue for the year even as it spends heavily to build the capability.
The strategic calculus is a defensive land grab rather than a near-term profit play: both operators report minimal cannibalization, with only about 1 overlap between prediction-market users and existing sportsbook customers, meaning the spending is aimed primarily at capturing a new customer segment before Kalshi and other prediction platforms establish durable habit and market share. DraftKings CEO Jason Robins framed the bet in lifetime-value terms, telling investors the company expects prediction customers to eventually generate returns comparable to sportsbook customers once monetization matures — an argument that asks shareholders to accept near-term EBITDA losses against a longer payback horizon.
The regulatory backdrop adds urgency: the CFTCs pending rule proposal on prediction markets will determine whether the derivatives-based structure Kalshi and others use remains a durable end-run around state betting law or gets narrowed to close that gap, and neither DraftKings nor FanDuel can afford to sit out the category while that question is unresolved. Given that DraftKings and FanDuel together control roughly two-thirds of the U.S. sports betting market, their entry into prediction markets also raises the stakes for state regulators and tax authorities who built licensing and tax regimes around a betting structure this new category is designed to route around.
For the wider betting and media ecosystem, the spending war signals that prediction markets have moved from regulatory curiosity to a core battleground for the incumbent operators next growth phase, and that the outcome of the CFTCs rulemaking — not just competitive execution — will determine whether this years heavy losses convert into a durable new revenue category or prove to be a costly defensive maneuver against a regulatory arbitrage that ultimately gets closed.
