DraftKings could see crossroads with Kalish exit, prediction markets

Co-founder and president Matt Kalish will depart DraftKings early next year, symbolically marking a new chapter as the company also explores new avenues including prediction markets.

The company indicated in an SEC 10-Q filing on Friday that Matt Kalish will depart from his role effective 31 March 2026. Kalish will remain as a director on the DraftKings board after the transition date. Kalish and DraftKings mutually agreed on the transition earlier this month, according to the filing, and financial terms of his agreement were referenced but not disclosed.

DraftKings prepares to enter 2026 in something of a transition phase. Kalish’s departure comes a few months after DraftKings announced a $10 million settlement around its Reignmakers NFT product. The company also expects the launch of a new prediction market offering following the acquisition of Railbird and it has several new media partnerships

Perhaps most notably, ahead of its third-quarter earnings release this week, DraftKings signed a multi-year partnership with ESPN in a deal that designates the company as the official sportsbook and odds provider of the network.

Robins bullish on DraftKings future

Despite a partnership that links two of the largest sports media and entertainment companies across the nation, the ESPN deal took a back seat to prediction markets on Friday’s earnings call.

Wall Street analysts spent the majority of the call discussing the offering, in light of DraftKings’ acquisition of Railbird Technologies last month. The purchase of Railbird Exchange, a federally licensed exchange designated by the US Commodity Futures Trading Commission, enables DraftKings to make its highly anticipated entry into prediction markets.

On Friday’s call, DraftKings CEO Jason Robins noted that he sees the offering as a significant incremental opportunity for the company. In spite of a down quarter due to a series of unfavourable sports outcomes, Robins told analysts that he has never been more bullish about the future of the company.

“That may sound surprising given we are revising our fiscal year 2025 guidance ranges today. However, underlying growth in our business is accelerating,” Robins said. “Overall, I believe that our long-term financial potential has never been brighter.”

Launch of DraftKings Predict upcoming

Robins said that the company will launch DraftKings Predict in the coming months, but he did not specify an exact date.

Over the last 10 months, prediction markets have created significant buzz as traditional sportsbooks grapple with a new competitor. The markets offer sports event contracts that mirror financial derivatives such as oil and grain futures. Kalshi, a leading prediction market, has faced a wave of litigation across numerous jurisdictions, which claim that the site is violating various state laws by offering an illegal product.

Robins told analysts that DraftKings has had numerous conversations with state regulators as trends on prediction markets evolve. He stressed that the company treats its relationships with those regulators with the utmost respect. As such, DraftKings only plans to offer sports event contracts in states without legal sports betting.

DraftKings disclosed in the 10-Q filing that it paid $48.6 million for the Railbird acquisition, consisting of approximately $19.9 million in cash and 0.9 million shares of the Company’s Class A common stock valued at $28.7 million. The acquisition contains additional considerations of up to $200 million, according to the filing.

Other highlights from DraftKings Q3 earnings

• DraftKings’ metric known as “monthly unique payers” (MUPs) came in at 3.6 million average customers in the third quarter, remaining unchanged from the same period in 2024. When excluding Jackpocket, the metric on monthly unique players increased by 6% year-over-year to 3.1 million.
• Another metric with the abbreviation “ARPMUPS” came in at $106, representing a slight increase from the same period in 2024. The abbreviation stands for “average revenue per monthly unique player”. DraftKings reported average revenue of $103 per monthly unique player in last year’s third quarter.
• DraftKings’ NBA handle is up 19% season-to-date, while its season-to-date handle for NFL wagering has increased by 13%. Overall, DraftKings’ sportsbook handle for October jumped 17%. For the NFL season-to-date, DraftKings’ parlay mix is up 800 basis points.
• DraftKings’ announcement of the ESPN deal coincided with news that it would mutually terminate a multi-year partnership with Penn Entertainment. DraftKings will begin its marketing partnership with ESPN effective 1 December. “Our betting approach has focused on offering an integrated experience within our products,” ESPN Chairman Jimmy Pitaro said. “Working with DraftKings will allow us to build on that foundation.”
• DraftKings’ board authorised an increase in the company’s repurchase programme from $1 billion to $2 billion. Since the inception of the programme, DraftKings has bought back 9.3 million shares, the company announced.

DKNG Q3 earnings miss

In a letter to shareholders, Robins wrote that a series of “customer friendly” outcomes negatively impacted company revenues by more than $300 million in the most recent quarter. DraftKings indicated that a handful of NFL outcomes had a “pronounced effect” on its revenue. Throughout the industry, sportsbooks have felt a pinch as favourites opened the season covering at a high rate.

While DraftKings increased revenue by 4.4% to $1.14 billion, the company still missed analysts’ consensus estimates of $1.21 billion on the quarter. DraftKings also reported adjusted EBITDA of -$126.5 million, below expectations of -$68.8 million. DraftKings’ adjusted earnings per share of -$0.26 fell in line with estimates.

As a result, DraftKings lowered its full-year 2025 revenue guidance at the midpoint by nearly 5% to $6 billion. DraftKings’ full-year EBITDA guidance of $500 million at the midpoint falls below analysts’ estimates of $746.3 million. The guidance includes the launch of DraftKings Predict, Truist Securities analyst Barry Jonas wrote in a research note. The impending launch was not factored into the guidance in the second quarter, he noted.

Under the marketing partnership with ESPN, DraftKings will integrate its product across numerous channels, including its online sportsbook, fantasy and DraftKings Pick6 products. An integration through ESPN’s mobile app will link to DraftKings Sportsbook.

According to the filing, DraftKings has about $1.3 billion of expected contractual obligations over the next five years with three media counterparties. Terms of the ESPN partnership were not disclosed. DraftKings also entered into a multi-year advertising partnership with NBCUniversal in September.

As of noon ET on Friday, DraftKings traded around $28 a share, up fractionally on the session. DraftKings is down approximately 27% over the last 12 months.