DraftKings has made another move in the prediction market race. Last week, the gambling giant officially launched its own prediction market exchange DKeX, along with an internal market-making department. The timing is quite precise—with the World Cup knockout stage in full swing and the NFL regular season returning in a few months, completing the technical layout before the dense autumn events is a clear strategic intent. CEO Jason Robins even claimed in the Q1 earnings call that, with the company's existing team of data scientists and pricing capabilities, DraftKings should theoretically be among the top three market makers in the global prediction market. However, PASA's official website noted that behind the management's bold statements, analysts are repeatedly pondering a math problem: Can the prediction market business, with an annual investment of up to $200 to $300 million, really make a profit from transaction fees?
How DKeX makes money: a few cents per contract
To understand the logic behind DraftKings' move, one must first look at the revenue structure of the prediction market. In December last year, DraftKings officially entered the prediction market by launching the CFTC-regulated DraftKings Predictions platform. However, at that time, it relied on external collaborations with CME Group and Crypto.com, handing over the core income from transaction fees to partners. The significance of DKeX is to take back this link—market-making on its own and collecting fees on its own, while also earning from the bid-ask spread.
Regarding specific rates, DraftKings' pricing structure is close to the Kalshi model: market takers pay a transaction fee ranging from **0.005 to 0.02** depending on the contract price range, while market makers are uniformly charged $0.0025 per contract. For reference: Kalshi uses a parabolic formula, where the cost of a market maker's limit order is about only a quarter of that of a market taker's market order; Polymarket has just updated a maker-taker fee system before the NCAA finals this spring. Although the fee rate designs of the three companies vary, the core logic is consistent—use low prices to attract market makers to provide liquidity and earn transaction fees from high-frequency market takers.
Burning money to change tracks: how much is lost this year, opinions vary
Having an exchange and market-making capabilities sounds smooth, but the numbers on the books are not so pretty. DraftKings has previously warned that the investment in the prediction market business by 2026 could lead to a loss of up to **$300 million**, and some analysts believe this estimate is conservative—Bank of America has reportedly raised the loss expectation to **$550 million**.
Citizens analyst Jordan Bend offers another perspective to encourage the market. In his research report, he points out that the gross margin of the market-making business is close to 95%, which is an extremely attractive business model. He expects DraftKings' market-making revenue to reach $243 million by 2027. After the news of DKeX's launch last week, DraftKings' stock price jumped $1127.59, still a significant difference from the $50 range after the 2025 Super Bowl, but at least it shows the market the possibility of breaking away from the single narrative of sports betting.
Robins is particularly optimistic about the integration effect. He mentioned that embedding DraftKings Predictions into the company's newly launched "super app" will further enhance the synergistic effect between the prediction market and sports betting. DKeX, as a vertically integrated technology base, "gives us stronger control over the technology supporting these products and allows us to run faster."
Industry background: soaring valuations and mergers undercurrents
The launch of DraftKings' exchange coincides with the collective inflation of valuations in the prediction market industry. Kalshi's valuation earlier this year reached **$22 billion**, and the latest round of funding is seeking to push this number to **$40 billion**, nearly doubling the valuation from 2025. Polymarket is also raising funds at a **$15 billion valuation**. The valuation level of the entire track is moving from "high" to "exaggerated."
On the flip side of the valuation frenzy is the rising expectation of mergers and acquisitions. Bernstein's research report released on Monday suggests that the emergence of vertically integrated platforms like DKeX has "set the stage for mergers and acquisitions among exchanges, sports betting, and consumer-facing companies." PASA's official website believes that when the valuations of leading companies have already factored in the growth expectations for the next few years, mergers and acquisitions may be more in line with capital efficiency logic than going it alone—DraftKings holding the exchange in its own hands is also preemptively setting up for the next round at this poker table.
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This article is from "PASA-Global iGaming Leaders," a gambling industry news channel: https://t.me/pasa_news
Original deep channel for gambling: https://t.me/gamblingdeep
Free data reports: @pasa_research
PASA Matrix: @pasa002_bot
PASA official website: https://www.pasa.news
