Jefferies warns DraftKings spending on prediction markets is pressuring earnings
Jefferies warned that rising spending on prediction markets and slower iGaming growth are weighing on DraftKings' near-term profitability. The brokerage flagged the costs as a drag on earnings in its coverage of the sportsbook operator. DraftKings generated $6.2 billion in revenue over the past twelve months, up from $5.4 billion a year earlier. The earlier Yahoo Finance article framed the stock as a potential buy amid growth in prediction markets.
DraftKings now faces a credibility gap between its $6.2 billion revenue story and Wall Street's emerging cost narrative. Jefferies' warning lands just eight days after BofA upgraded the stock on $400 million prediction-market fee upside, creating conflicting analyst signals that will confuse institutional positioning. The spending pressure validates what short sellers argued when Kalshi's 76% NFL volume lead triggered a 7.6% drop: DraftKings must burn cash it does not have to close a share gap against a better-capitalized rival.
DKeX volume matters less than spending discipline now. Jefferies' view spreads, DraftKings loses the narrative control BofA briefly granted, and every marketing dollar spent to chase Kalshi becomes evidence of futile escalation. The timeline is this earnings cycle: DraftKings must show it can grow prediction markets without destroying margins, or the stock re-rates down to a pure sportsbook multiple.