DraftKings Inc. (NASDAQ: DKNG) experienced a sharp 7.6% decline in its stock price on Thursday, closing at $22.47—down $1.86 from the prior day's $24.33—following the release of new data that revealed its DKeX prediction exchange has captured only a fraction of the market share compared to rival Kalshi during the opening week of the NFL season. The stock showed a slight recovery of 0.4% to $22.56 in premarket trading on Friday, but the selloff has raised questions about the company's strategic push into prediction markets.
The trading volume on Thursday was notably heavy, with 17.0 million shares changing hands—approximately 1.76 times the stock's 20-day average of 9.66 million shares. The intraday range spanned from $22.33 to $24.35. Notably, there were no new earnings releases or company filings that would have altered the financial outlook during the session, making the competitive data the most likely catalyst for the selloff, although technical factors cannot be entirely ruled out.
According to an analysis by Needham & Company, the eight prediction exchanges it tracks generated $14.6 billion in sports and parlay prediction-market volume during NFL Week 1—a figure that matches the total volume from the first 14 weeks of the previous NFL season. Kalshi dominated the market with a 76% share of reported exchange volume, while DraftKings' DKeX managed only about 3%.
However, these figures require careful interpretation. Prediction contracts can be traded multiple times, so notional exchange volume is not directly comparable to sportsbook handle. Needham estimated that consumer-equivalent handle was approximately $2.1 billion, and on that basis, Kalshi's share dropped to 67%, while DKeX remained near 3%. The firm also noted that the data may understate DraftKings' true prediction-market activity because some customer flow is routed through exchanges operated by other companies.
DKeX has demonstrated some traction since its launch in May, when it was integrated into the main DraftKings Sports & Casino app. By the week ending June 21, the company reported that Predictions had reached an annualized consumer volume of $3.4 billion and annualized total trading volume of $11.3 billion. More than 30% of customers had used combinations—DraftKings' term for bundling multiple contracts. Yet these run rates do not answer the profitability question, as neither figure represents revenue.
Owning the exchange is intended to give DraftKings greater control over product design and trading economics, but the NFL data now raises the question of whether that control can translate into meaningful market share without costly promotional spending. The margin pressure was already evident in the company's second-quarter results: sports consumer volume rose 14.5% year-over-year to $13.14 billion, but sports revenue fell 10.6% to $891.9 million, with sports net revenue margin dropping from 8.7% to 6.8%. Total revenue declined 4.6% to $1.44 billion, and adjusted EBITDA fell sharply from $300.6 million to $114.6 million.
Prediction markets could expand DraftKings' reach into states without traditional online sports betting, but the combination of low exchange share and rising acquisition spending could undermine that advantage. The 3% estimate, however, is only a snapshot from one NFL week, not a full-season verdict. DKeX is still new, and DraftKings has the ability to steer more activity onto its own exchange, leveraging its large existing customer base within the same app. The caveat about flow routed to outside exchanges also suggests that visible DKeX volume may not capture the entire picture.
Kalshi's lead carries its own regulatory risks. In August, a federal judge allowed Utah to enforce state anti-gambling laws against prediction markets, highlighting the unsettled boundary between federal derivatives oversight and state gambling rules. DraftKings' state-licensed sportsbook network is expensive to maintain, but it could become an asset if courts or regulators restrict where sports event contracts can operate.
The next key evidence will be operational: DKeX's consumer-equivalent share over several NFL weeks, customer-acquisition spending, and the sports net revenue margin in the next quarterly filing. Rising contract volume alone will not settle the thesis; investors need to see that share growth is achieved without another significant sacrifice in margin.
