DraftKings and FanDuel both used their Q1 2026 earnings cycle to signal a strategic move into prediction markets, the CFTC-regulated event-contract category that has spent the past 18 months in a federal-state legal tug-of-war. DraftKings disclosed a $200 million to $300 million investment line specifically for the prediction-markets business on its May 8 call. Flutter Entertainment confirmed in FanDuel’s May 6 release that it has already begun market-making on a third-party prediction platform as of April. Both moves frame prediction markets as a core 2026 growth lane rather than a side experiment.

DraftKings’ record quarter

DraftKings posted $1.65 billion in Q1 revenue, up 17% year-on-year, and a record adjusted EBITDA of $168 million. The company reaffirmed full-year guidance of $6.5 billion to $6.9 billion in revenue with adjusted EBITDA between $700 million and $900 million. Monthly unique players averaged 4.2 million, slightly below the 4.3 million Q1 2025 figure, but average revenue per monthly unique player climbed from $108 to $131, with the non-lottery measure rising 15% to $141.

CEO Jason Robins framed the prediction-markets push as both an opportunity and a competitive imperative on the call: “We should theoretically have one of the top two or three market makers in the world, arguably the best, given our modelling capabilities.” Robins also called the new line “one of our fastest to profitability business lines we’ve ever launched.” DraftKings intends to operate as a market maker across multiple platforms, not only on a future in-house product, though Robins declined to name specific third-party venues.

FanDuel’s handle dip, iGaming growth

But the FanDuel picture is more mixed. Group US revenue grew 6% year-on-year to $1.14 billion, but sports-betting handle was down 9%, and US adjusted EBITDA fell 26% to $119 million. The handle decline is partly a consequence of customer-friendly outcomes during the NFL playoffs and partly a sign that the top-of-funnel retention question facing every regulated US sportsbook has not gone away.

iGaming was the bright spot. Net revenue from the segment grew 19% year-on-year to $564 million, and the sportsbook net revenue margin lifted to 8.6% from 7.8% a year earlier. Average monthly players slipped 1%. Flutter CEO Peter Jackson said group revenue growth of 17% year-on-year “reflected positive signs from our U.S. sportsbook improvement plan, where performance was ahead of our expectations in March.”

Flutter began third-party prediction-market making in April. The disclosure was the first concrete operational step from either US duopolist into the segment that DraftKings has been theorising about publicly since late 2025.

The prediction-market pivot

Reading both calls together is the point. The two operators that together control more than 70% of the US sportsbook handle are framing prediction markets as the natural extension of their pricing-and-risk capabilities into a federally regulated venue category. The CFTC-side framework gives them a path that bypasses the state-by-state licensing slog that defined the post-PASPA expansion. The trade-off is the legal uncertainty around state preemption challenges, which is still unresolved and is currently being litigated in roughly ten US jurisdictions against Kalshi.

BetMGM rounded out the cycle with $696 million in revenue, up 6% year-on-year, and adjusted EBITDA of $25 million, up from $22 million. The digital margin lifted 110 basis points to 3.8%. BetMGM has not publicly signalled a prediction-market push, leaving the segment to its two larger US competitors for the moment.

This reporting on the Q1 2026 earnings cycle is excellent and captures a pivotal moment in the “financialization” of US gambling. To improve this piece, we should emphasize the divergence in revenue quality between the two leaders and more explicitly explain why prediction markets are the chosen escape hatch from the plateauing sportsbook handle.

Why Prediction Markets? Why Now?

The move into event contracts is a strategic side-step of the current legal environment. By operating under CFTC jurisdiction, these companies can theoretically offer swaps on non-sporting events, such as elections, and even sports outcomes via a federal framework that bypasses the state-by-state licensing slog.

However, this path is not without risk. The industry is currently watching the Kalshi litigation across ten jurisdictions. If state courts successfully re-characterize these contracts as illegal gambling, the $300M DraftKings investment could face a range of legal issues. They’re also watching Kalshi’s valuation skyrocket and know the potential profits.

What to watch next

Three threads define the next quarter. First, whether DraftKings unveils a specific prediction-market product timeline or remains in market-maker-only mode through Q2. Second, which third-party platforms Flutter is making markets on, and whether that disclosure surfaces before the Q2 call. Third, whether BetMGM or Caesars or Penn Entertainment break their silence on the segment when their Q2 results land in August. The handle numbers will tell the story. They always do.