Wall Street likes what DraftKings just took away from itself

DraftKings (DKNG) turned on its own prediction markets exchange this week, a shift the company has been engineering since last fall.

For seven months, every contract traded on DraftKings Predictions ran through somebody else’s infrastructure. Now DraftKings owns the plumbing.

DraftKings stops renting its own product

Since DraftKings Predictions launched in December, the platform leaned on CME Group and Crypto.com to list, price, and settle every contract.

Those exchanges controlled the menu and kept a cut of the economics that came with it.

DraftKings launched its proprietary prediction markets exchange, DKeX, with integration into its unified DraftKings: Sports & Casino app this week.

The new exchange runs on the technology and CFTC license DraftKings picked up when it bought Railbird Technologies last October, according to the company’s announcement.

Owning the exchange means DraftKings now keeps more of the fee on every contract it sells, instead of splitting it with a third party.

Aaron M&period Sprecher &sol Getty Images

DraftKings' volume made this launch inevitable

DraftKings Predictions generated roughly $3.4 billion in annualized consumer volume and $11.3 billion in annualized total trading volume for the week ended June 21.

That is up sharply from $1.3 billion and $3.1 billion in May, and from $1 billion and $2.3 billion in April, based on the company’s own first-quarter disclosures.

That growth curve is the real reason DraftKings moved now. Renting exchange capacity made sense when volume was small. At billions of dollars a week, the fee that used to go to CME Group becomes material money DraftKings can keep instead.

More than 30% of customers have already used the platform’s bundled “combos” feature, the company shared, a sign the product is sticking rather than just attracting curious first-time traders.

Analysts are bullish but DraftKings stock is not following

DraftKings shares closed at $24.53 the day DKeX launched, down 2.5% on the session, according to Zacks Investment Research.

Shares pushed as high as $25.46 the next day before fading back near $24.55, based on Robinhood market data, leaving the stock roughly 34% below where it traded six months ago.

More DraftKings:

• BofA reveals $3 billion reason to watch DraftKings now
• Morgan Stanley reveals new DraftKings stock price target
• DraftKings Just Turned Profitable, and Prediction Markets Want Its Lunch

That gap looks strange next to what analysts are saying. Citizens raised its price target to $36 from $34 this week, citing DraftKings’ plan to become the leading acquirer of prediction-market customers, Investing.com confirmed.

Bank of America lifted its long-term market estimate to $1.9 trillion in annual contract volume from $1.3 trillion, Bloomberg noted, though the bank kept a neutral rating and warned that 2026 losses could run as high as $550 million against guidance of $200 million to $300 million.

The disconnect is the story here. DraftKings just removed a structural cost and proved its prediction markets business can scale into billions of dollars in weekly volume. Wall Street’s price targets reflect that. The stock, still trading near its 52-week low, does not yet.

A similar bet is playing out at FanDuel, which has leaned on CME Group rather than building its own exchange, and at Kalshi and Polymarket, which never needed a betting company’s infrastructure to begin with.

Owning the exchange gives DraftKings a cost advantage those rivals will eventually have to answer.

The World Cup and an EBITDA-heavy second half will be the first real test of whether that advantage shows up in DraftKings’ margins, or whether the promotional spending needed to win prediction-market customers eats the gain before investors see it.

Related: BofA reveals $3 billion reason to watch DraftKings now