Sportsbook operator DraftKings discusses growth strategies in Q1 call
DraftKings Discusses Parlays and Prediction Markets During Earnings Presentation
Published: May 9, 2025, 01:18h.
Last updated: May 9, 2025, 01:18h.
Contributors: Todd Shriber, Financial, Gaming Business, Mergers and Acquisitions
In DraftKings' (NASDAQ: DKNG) first-quarter earnings conference call, parlays and prediction markets stood out as key discussion points. Despite adjusting their 2025 guidance lower, the gaming company's shares rose in midday trading.
Origina predictions and customer-friendly outcomes in the first quarter led to the revised outlook. DraftKings CEO Jason Robins pointed out that if not for favorites winning at such high rates during the NCAA Men's Tournament, they would have raised their 2025 financial forecasts.
Higher seeds performed remarkably well in the tournament, with all four number one seeds reaching the final four, three number two seeds, and one number three seed making it to the elite 8. Across the entire competition, higher seeds dominated, achieving an 82% win rate, a tournament record.
In response to the tournament's high chalk rate, Robins highlighted that this outcome was already factored into DraftKings' predictions. The call then shifted its focus onto other topics, including the sportsbook's parlay potential.
Embracing Accumulator Bets
DraftKings CFO, Alan Ellingson, informed analysts that the first-quarter structural sportsbook hold of 10.4% surpassed internal expectations due to a 370-basis-point increase in parlay handle mix from the previous year. This boost indicates new customers are increasingly involving themselves in parlay betting.
Additionally, the CEO mentioned strong year-over-year gains in both same-game parlays (SGPs) and overall average live count in the MLB season's early stages. Robins also highlighted an increase of 36% in April MLB handle compared to the previous year, which bodes well for future growth as the US sports calendar nears a point without the NFL and NBA seasons.
Potential Prediction Markets Involvement
Although DraftKings withdrew an application with the National Futures Association (NFA) in April, potentially hinting at regulatory or organizational changes regarding derivatives or prediction markets, CEO Jason Robins stated the company is still considering the prediction markets space. As derivatives exchanges offering sports event contracts gain traction, it stimulates discussions about regulation.
Robins addressed these topics during the call, suggesting that if certain regions have not legalized prediction markets yet, they may risk missing out on opportunities to prosper, given the growing popularity of this concept. He stated, "I think as it continues to grow, that's just going to continue to be a powerful lever, so do you want to do it in a way that makes sense. If you're a California tribe or if you're a state that hasn't legalized it yet, does it allow you to prosper, or do you want to watch it happen somewhere else?"
In related news, DraftKings' rival, FanDuel parent Flutter Entertainment (NYSE: FLUT), expressed interest in exploring prediction markets opportunities due to its past experience with Betfair Exchange.
In summary, DraftKings is keeping a close eye on the prediction markets landscape while exploring potential opportunities to capitalize on this emerging area. The company's strategic interest in prediction markets follows a cautious yet deliberate approach, aligning with its broader efforts to innovate within the sports betting and gaming industries.
- In the conference call, DraftKings' CFO, Alan Ellingson, revealed that the company's first-quarter structural sportsbook hold of 10.4% exceeded expectations due to a 370-basis-point increase in parlay handle mix.
- The CEO, Jason Robins, highlighted strong year-over-year gains in both same-game parlays (SGPs) and overall average live count in the MLB season's early stages.
- Despite withdrawing an application with the National Futures Association (NFA) in April, Robins mentioned that DraftKings is still considering the prediction markets space, suggesting that certain regions may risk missing out on opportunities if they don't legalize it.
- Robins' statements during the call indicate that DraftKings is keeping a close eye on the prediction markets landscape while exploring potential opportunities to capitalize on this emerging area.
