FanDuel says its upcoming prediction markets will not threaten its U.S. sportsbook licences

FanDuel parent Flutter Entertainment said on Wednesday it is confident its upcoming launch of prediction markets will not jeopardize its U.S. online sports betting licences, pushing back on warnings from several state regulators as competition intensifies in the fast-growing sector.

Flutter CEO Peter Jackson said the company would not proceed with next month’s rollout if it believed the move could endanger its market-leading sportsbook business. “We wouldn’t do anything to put our existing OSB business at risk, but we’re also not gonna sit here on the sidelines and watch someone else go after this big opportunity,” Jackson said during a Morgan Stanley fireside chat. 

FanDuel plans to use prediction markets as a lower-cost customer acquisition tool in states where sports betting is still illegal, a strategy executives described as incremental to revenue but more valuable for funneling new audiences into its sportsbook once legislation changes. Flutter’s shares have fallen about 25% this year, an $11 billion drop in market value, as analysts increasingly frame the company’s outlook in the context of expanding prediction markets and wider sector pressures.

To ease licensing concerns, Flutter has agreed not to offer prediction markets inside states where it already operates online sports betting and has held direct discussions with regulators, tribes and other stakeholders. Jackson said Nevada - where FanDuel surrendered its licence at the state’s request - was “a unique situation” because the company does not run a consumer-facing sportsbook there. Several states pursuing legal action to restrict prediction markets have issued warnings, though none have revoked licences.

FanDuel executives said the product offers a path to reach users in the half of the U.S. where wagering remains illegal, mirroring its use of fantasy sports and free-to-play games to build presences before state launches. The company has already signed up more than 110,000 users in Missouri ahead of its expected launch and plans to replicate the model in California and Texas.

The company expects prediction markets to follow a financial trajectory similar to a new state sportsbook launch but with lower initial investment. CFO Rob Coldrake said the product’s exchange-fee model is risk-free for FanDuel and “NPV-positive within a relatively short time frame.” 

Flutter expects operations to be contribution-positive in year two and cumulatively profitable in year three. Analysts questioned the 50% revenue share with partner CME Group and projected losses of $200 million to $300 million, but Flutter argued the approach is far cheaper than traditional sportsbook expansion, which can require about $35 million per one percent of the U.S. population.

Meanwhile, rival Fanatics is preparing its own entry. CEO Michael Rubin told CNBC the company will launch its prediction-market product “in the next couple of weeks” in partnership with Crypto.com. “If the regulatory environment says that we can do this, we’re going to do it, and if it changes, then we’ll change with it,” he said.

The prediction-market field is expected to become crowded by year-end, with Coinbase, DraftKings, FanDuel, Polymarket and Fanatics all preparing consumer-facing launches.

DraftKings and FanDuel recently left the American Gaming Association as both companies move deeper into the space. Some regulators, including in Maryland, have cautioned that prediction markets could affect sportsbook licences, underscoring tensions as operators race to capture new demand.