The company sells sports event contracts in the 18 states where it has no online sportsbook, and in none of the 27 where it does. That design is what lets it tell investors the products barely touch, tell the NFL its ads never cross the line, and tell fans it’s in all 50 states. It also rests on an assumption the Supreme Court has been asked to settle: that a contract on a Cowboys spread, sold in Texas, is not sports betting.
“DraftKings is now available in all 50 states, meaning no fan is left out.” That was the premise of the “Take Your Game Anywhere” campaign that launched Aug. 31, in the words of Chris Mendez, creative director of the agency Translation, who told Clios it was achieved “through their sportsbook and predictions offering.”
The claim is true, and the way it is true is the more interesting fact. DraftKings’ availability page — headed “DraftKings is available nationwide for sports” — assigns each state to exactly one of three lists.
“Online sports betting” covers 27 states plus Washington, D.C., and Puerto Rico. “Prediction sports markets” covers 18 states: Alabama, Alaska, California, Delaware, Florida, Georgia, Hawaii, Idaho, Minnesota, Nebraska, New Mexico, North Dakota, Oklahoma, Rhode Island, South Carolina, South Dakota, Texas, and Utah. “Free-to-play sports contests” take the remaining five: Mississippi, Montana, Nevada, Washington, and Wisconsin. No state appears on two lists.
Stephen Miraglia, DraftKings’ senior director of communications, put it plainly to Gambling Insider: the company does not operate predictions where it has an online sportsbook, and where the sportsbook is not allowed, it has predictions, and daily fantasy besides.
DraftKings’ June 26 announcement of its in-house exchange, DKeX, says the same in corporate language: “The DraftKings Sports experience is available nationally, including sports event contracts in 18 states.” ESPN, reporting the NFL partnership on Aug. 27, described DraftKings, FanDuel, and Fanatics as offering prediction markets “in states without legal sports betting.”
The distinction matters. What DraftKings keeps out of sportsbook states is sports contracts. The Predictions app itself launched in December in 38 states, with financial-only markets in some sportsbook states such as Connecticut, according to reporting at the time; the December launch release promised “sports event contracts in certain states such as California, Florida, Georgia, and Texas.”
The Map Solves Three Problems at Once
The first is the NFL. The league confirmed to Gambling Insider this week that prediction-market advertising is banned from its games, stadiums, club deals, and player endorsements, and that sportsbook partners “must advertise one of their approved products” and “cannot do general advertising.”
DraftKings, one of three official sportsbook partners signed Aug. 27, says the 50-state campaign is kept out of NFL windows and that everything it airs there is pre-approved by the league. Because the prediction product has no customers in the states where the sportsbook advertises, the rule costs it little.
The second is regulators. The company’s state-specific predictions campaign on Aug. 25 targeted California, Texas, Georgia, and Florida — the four largest states with no legal online sportsbook — with $200 in bonuses after a $5 first trade. CEO Jason Robins was explicit that the states were chosen for that reason. The pitch is not “bet here instead”; it is “there is nothing else here.”
The third is investors, and here the argument is that the two products do not cannibalize each other. In the first-quarter shareholder business update, Robins wrote:
We continue to see no discernible impact from the rise of predictions on our Sportsbook business,” adding that internal and third-party data suggested the effect on industry handle was “only very slightly and primarily among low-margin wagers, resulting in a negligible impact to revenue.”
The second-quarter update, dated Aug. 6, went further: “we are seeing massive new customer acquisition in states without regulated Sportsbook,” about 1% customer overlap between DraftKings Sportsbook and “the largest prediction market operator in Sportsbook states,” and a company estimate that “80% to 90% of prediction market consumer volume in Sportsbook states comes from professional betting syndicates and institutional traders.”
The overlap figure is based on Carbon Arc credit- and debit-card deposit data, while the 80-90% figure is the company’s internal estimate.
DraftKings’ cited numbers describe the map as it was drawn: if the prediction product is confined to states where DraftKings has no sportsbook, low overlap in sportsbook states is a consequence of the design, not evidence about what customers would do given the choice.
Volume Surges While Margin Slips
The growth is very real. Robins told the second-quarter call that annualized total volume traded on predictions rose from $2.3 billion in April to $11 billion in July, that “over 600,000 customers have engaged with our predictions offering year-to-date,” and that combos (parlays, in sportsbook terms) were “already approaching 20% of predictions Consumer Volume” within weeks of launch.
Putting predictions into the flagship app cut predictions customer acquisition cost “more than 80%” in April, the first-quarter letter said. The annualized figures extrapolate a single month; the July number implies roughly $900 million actually traded.
The margin tells a different story. From the second quarter, DraftKings reports “Sports Revenue,” combining sportsbook and prediction-market revenue, against “Sports Consumer Volume,” combining handle and trades. Volume rose 14.5% year on year to $13.14 billion; Sports revenue fell 10.6% to $892 million, and the net revenue margin dropped from 8.7% to 6.8%.
The company attributes the fall to “customer-friendly sport outcomes,” namely the Knicks’ championship, felt hardest in its largest sportsbook state, and the World Cup group stage, and to “promotional reinvestment associated with new customer acquisition on our Sportsbook and Predictions offerings.”
On the earnings call, Robins put the outcomes at “about an $80 million revenue headwind” and said the rest was acquisition; normalized for both, he said, revenue grew 10%. What the company has not said is what predictions contributes to the blended figure.
Sportsbook handle alone grew 11%, so roughly four points of the volume growth is prediction-market trading, at a revenue rate the company does not disclose and has described only as lower per customer than its sportsbook, offset by “the higher-margin profile of the business.”
Full-year guidance was held at $6.5 billion to $6.9 billion of revenue and $700 million to $900 million of adjusted EBITDA “after including our expected investment in Predictions”; in the first quarter, that investment, with the Arkansas sportsbook launch, was blamed for adjusted EBITDA landing at $168 million rather than above $200 million, as Gambling Insider reported.
One more line from the first-quarter update belongs in the record: “Early third-party data suggests that Predictions customers are experiencing losses more quickly than Sportsbook customers.”
The company framed it as a reason for trust and consumer protections. It is also a description of the product it is marketing in the four largest states where no regulated sportsbook exists.
The Map Assumes the Courts Answer One Way
The structure DraftKings has built is the one the NFL’s rules reward: a licensed product in the league’s inventory, an event-contract product everywhere else, and no need to argue about the line between them.
The company self-certified nine categories of football contract on DKeX on Aug. 10, covering game winners, spreads, totals, and player statistics — a full NFL betting menu, for sale only where the NFL’s partner cannot sell the real thing. The league, which told the Commodity Futures Trading Commission that prediction-market rules “fall significantly short,” has its partner’s assurance that none of it will appear in its games.
That is a settlement between a league and its largest sportsbook, not a settlement of the question. The 18 states on DraftKings’ predictions list are, by definition, the states where no legislature has authorized sports betting.
Whether a federally regulated contract on a Cowboys spread is sports betting in Texas is the question the Ninth and Third Circuits have answered differently, and New Jersey has asked the Supreme Court to settle. As things stand, DraftKings’ map assumes the answer is no.
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