DraftKings Stock Sinks 21% as Prediction Markets Bite and Seminoles Sue

^{DraftKings CEO Jason Robins is facing costly legal challenges from multiple angles, challenging the once seemingly unstoppable force in betting. (Screenshot: CNBC / ZUMA Press Wire)}

DraftKings stock fell 21% last week, and the sportsbook is pointing at a direct challenger that does not have to abide by the stringent rules it does: prediction markets. Now the Seminole Tribe of Florida is suing the company over its move into that very business.

The losses have spread across the U.S. stock market this year. The S&P 500 is down almost 5% since January, and the technology-heavy NASDAQ is down almost 7%. They have also reached the gaming sector, where industry-leading sportsbook DraftKings reported the results that triggered its steep drop.

DraftKings Misses Expectations, Dragging Flutter Down

Last week, DraftKings, which trades on the NASDAQ Exchange, shared its views on fiscal year 2026 performance (which just concluded on September 30) and looked ahead to fiscal year 2027. Neither report was good.

Analysts expected the company to earn $1.2 billion in the FY 2026 third-quarter reports, but DraftKings said it would come up short, earning between $800 million and $1 billion after tax and business tabulations.

The pain is not limited to DraftKings. Its main competitor, Flutter Entertainment PLC, which owns FanDuel, saw an 11% drop in its stock price after the announcement, from $82 per share to $75.

So what do the top sports betting sites say is behind the revenue shortfall and the market decline? The rise of the prediction market industry.

Prediction Markets Have the Edge

In the last year, prediction markets have rocketed into the consciousness of the U.S. consumer, with sites like Kalshi and Polymarket (and their advertising) becoming ubiquitous in the media and online.

Because prediction markets are not bound by the strict rules regarding sports betting, they have been able to work their way into all fifty states, taking some of the market from sportsbooks that operate where they are legally regulated. The two biggest sportsbooks have already picked prediction markets over Nevada licensing, and they are also leaving the American Gaming Association over the dispute.

The edge should not be overlooked. Prediction markets are open for business across the U.S. Sportsbooks, by contrast, are limited to the 39 states (and Washington, D.C.) that have passed regulations or not outright banned the activity, such as Utah, Washington state and Hawaii.

DraftKings Bets Big on Prediction Markets

DraftKings is not taking the threat lightly. It plans to aggressively move into prediction markets, having invested between $650 million and $700 million over the last year and adding another $350 million in 2027.

Because it can cover the entirety of the U.S., DraftKings is expected to see returns on the investment within 18 months, but it will take a great deal of money to start its prediction market operations.

Seminoles Take DraftKings to Court

One force in the gaming industry is standing up to DraftKings’ moves into prediction markets, and it could be a formidable opponent.

In October, the Seminole Tribe of Florida filed a lawsuit against DraftKings and its Chief Executive Officer, Jason Robins, for operating an illegal sports betting business in Florida. The Seminoles allege that offering prediction market resources to customers in the Sunshine State violates the 2021 gaming compact that the state and the tribe reached, a compact the Supreme Court has declined to disturb. In a 72-page complaint, the tribe spells out how DraftKings is invading its territory.

Under the Compact, Florida gave the Seminole Tribe full sports betting rights. The Seminoles cite the DraftKings “Predictions” app as “functionally identical” to what they offer with their Hard Rock Bet app.

“The illegal sports betting app violates the Compact and state law,” the Seminoles say in their motion, “and deprives Florida of substantial revenue and regulatory oversight, including mandatory consumer protections such as minimum 21-year-old age verification and restrictions on certain categories of bets.” (For example, Hard Rock Bet does not allow wagering on the individual performance of collegiate athletes.)

“DraftKings’ own marketing identifies the offering as gambling and entices potential customers with ‘bonus’ bets,” the argument concludes.

DraftKings has yet to respond to the Seminole actions, but a storm is on the horizon for its future operations. The suit also follows other tribal pushback, as tribes warn prediction markets may undermine state compacts.