DraftKings Craters 6% as Predictions Product Costs Spook Investors

DraftKings (NASDAQ:DKNG | DKNG Price Prediction) stock is down 6% in Thursday afternoon trading, falling from a prior close of $23.94 to $22 and change. The drop adds to what’s already been a brutal stretch for the stock, which already entered today’s session down 31% year-to-date.

Today’s catalyst is familiar to anyone who’s followed DraftKings for the past year: the company is spending now, with revenue expected later. Investors are reacting to renewed concerns about the upfront cost structure of the company’s new Predictions product, which isn’t expected to generate any revenue in 2026. For a stock that was supposed to be turning a corner after posting its first-ever full-year GAAP profit, this has been a tough pill to swallow.

Today’s decline also diverges from the broader gaming sector, which is trading with positive momentum this session, making the DraftKings-specific nature of the selloff hard to ignore.

Predictions Product Costs Drive the Selloff

DraftKings launched its Predictions product as part of a broader Super App strategy, consolidating Sportsbook, Predictions, Casino, and Lottery into a single integrated platform. The product offers federally regulated event contracts tied to sports, culture, and politics, operating under CFTC oversight through a partnership with Crypto.com’s derivatives platform.

The strategic logic is sound. DraftKings can reach users in states where traditional online sports betting isn’t yet legal, widening its addressable market meaningfully. CEO Jason Robins called it “a massive, incremental opportunity” and said the company plans to “deploy growth capital to build the best customer experience in Predictions, and acquire millions of customers.”

The problem is the timing. With no revenue contribution from Predictions expected in 2026, investors are questioning whether the company can absorb those costs without undermining the profitability milestone it just achieved. DraftKings posted full-year 2025 GAAP net income of $3.71 million, its first-ever annual profit, making the prospect of renewed margin pressure particularly unwelcome.

A Growing Market With Real Competition

The prediction market space is expanding quickly. Rivals Kalshi and Polymarket have been reporting record trading volumes, with Kalshi hitting record volume during the NFL Playoffs earlier this year. The central question for DraftKings investors is whether these platforms are pulling users away from established sportsbooks or simply growing the overall market.

Macquarie analyst Chad Beynon has argued the latter, calling the prediction market selloff in DraftKings and Flutter Entertainment “overdone” and sizing the combined opportunity at $5 billion. Morningstar’s Dan Wasiolek called DraftKings’ expansion into prediction markets supportive of its brand advantage and narrow economic moat. The CFTC is currently drafting clearer rules for the space, which could reduce regulatory uncertainty ahead.

That’s the bull case, but the bear case is just as real. Kalshi recently filed a federal trademark application classifying its product under the gambling industry, drawing scrutiny from California’s attorney general over CFTC oversight. Regulatory uncertainty cuts both ways, and DraftKings is investing heavily before the rules of the road are fully written.

DraftKings: Bull and Bear Cases

Despite today’s drop, the longer-term investment thesis for DraftKings remains intact for many on Wall Street. The average analyst price target sits at $38.80, implying substantial upside from the current DKNG share price. BTIG analyst Clark Lampen reiterated his Buy rating as recently as March 23, even as he trimmed near-term estimates to reflect promotional costs from the Arkansas launch.

DraftKings Director Harry Sloan put real money behind his conviction, purchasing 100,000 shares at $21.85 on February 17 for a total of $2.18 million. That buy came just days after earnings, suggesting at least one insider sees value near these levels. For a deeper look at the longer-term price thesis, our earlier analysis DraftKings Price Prediction: Why DKNG Is Ready For a Massive Breakout lays out the case in detail.

That said, the bear case deserves equal weight. Short interest for DraftKings stock stands at 8% of the float, which is elevated versus the company’s peers. Moreover, a landmark product liability lawsuit filed by the Public Health Advocacy Institute in March alleges DraftKings’ microbetting features are unreasonably dangerous.

Also, a Federal Reserve Bank of New York study linked online sports betting to increased consumer debt delinquency rates. These aren’t existential threats, but they’re real overhangs.

Today’s selloff is understandable. DraftKings is asking investors to accept near-term cost pressure in exchange for a long-term payoff in an unproven product category. Watch for whether management provides more specific timelines for Predictions revenue contribution at the next earnings call, as that clarity could be the catalyst that steadies DKNG stock.