DraftKings Inc.
Predicting More Downside Risk
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Research Overview

INDEX:
S&P 500
Sector:
Consumer Discretionary
Position:
Short
Date:
Oct 3, 2025

After conducting a forensic review of DraftKings Inc. (Nasdaq: DKNG) (“DKNG” or the “Company”), we have serious concerns regarding the impact to DKNG’s sports bookmarket share given the significant volume, or handle, being generated by emerging prediction markets for sports betting such as Kalshi and Polymarket. Spruce Point has been following the DKNG story closely; despite the recent share price movement and other prescient short-seller critiques, we believe there is still significantly more downside risk because investors and sell-side analysts are not fully understanding the gravity of the situation and long-term disruptive impact on the Company’s business. Our report details why we believe that the prediction exchanges will take more market share than predicted and that legal challenges to the exchange model are unlikely to be resolved quickly.  Based on our evaluation, we estimate 35% - 60% potential downside and material market underperformance risk.

The report highlights several key concerns with the Company, including:

• We believe Kalshi and other sports prediction markets will continue to operate while state litigation drags on. We believe the U.S. Supreme Court will have to ultimately decide on their legality, which may not happen until summer 2027.

• It appears DKNG will have to sit on the sidelines while the litigation continues. State gaming commissions have warned online sportsbooks such as DKNG not to enter the prediction markets.

•  Kalshi appears to offer better odds than DKNG which we believe is driving Kalshi’s rapid handle growth and potential market share capture.

•  We believe the market has misinterpreted Kalshi’s handle and hold rate and sell-side analysts have been reluctant to lower DKNG’s consensus revenue estimates.

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