DraftKings
The company that spent a decade building a regulated sports betting empire only to watch prediction markets threaten to make state-by-state licensing irrelevant.
DraftKings was founded in December 2011 by Jason Robins, Matt Kalish, and Paul Liberman — three former Vistaprint colleagues who quit their jobs and started building from Paul Liberman's spare bedroom in Watertown, Massachusetts. Their first product was a one-on-one baseball contest launched on Opening Day 2012 with $100 prizes. The idea was to compress season-long fantasy sports into a single day: draft a new team every contest, win or lose in hours rather than months. Major League Baseball invested within a year — the first US professional sports league to back a daily fantasy company, a signal that DraftKings was not a fringe product. By 2014, the platform had one million registered users. By 2015, DraftKings and rival FanDuel were spending $750 million combined on television advertising in a single football season, flooding every commercial break with green-and-black branding. The spend was unsustainable. The business model was about to face a different kind of threat.
The attorney general investigations of 2015 nearly killed daily fantasy sports as a legal category. New York, Illinois, and Texas challenged DFS as illegal gambling. DraftKings survived — the legal arguments held — but the experience forced the company to build compliance infrastructure that would later become its competitive advantage. The 2018 Supreme Court ruling striking down PASPA transformed that infrastructure into a license-printing machine. DraftKings launched the first mobile sportsbook in New Jersey within months of the ruling, using its DFS customer database, brand recognition, and state-by-state regulatory experience to outrun competitors who had to start from scratch. By 2020, DraftKings went public via a SPAC merger with Diamond Eagle Acquisition Corp and SBTech, a turnkey sports betting technology provider, raising the capital to scale nationally. By 2024, DraftKings and FanDuel controlled 80% of the US online sports betting market. Revenue reached $4.77 billion. The company finally delivered the profitability it had been promising investors for four years.
Then prediction markets arrived. In 2025, Kalshi began offering sports event contracts under federal CFTC jurisdiction — bypassing the state gaming licenses that DraftKings had spent over a decade and hundreds of millions of dollars obtaining. The threat was structural: federally regulated prediction markets do not need state approval to operate, undercutting DraftKings's core competitive moat. DraftKings responded by building its own prediction market product — DraftKings Predict — and committing $200-300 million in marketing spend against the category in 2026. The company acquired a CFTC-regulated exchange to enable federally compliant event contracts. As of August 2026, DraftKings generates less than 0.5% of Kalshi's prediction market transaction fee revenue. The largest US sportsbook is spending heavily to catch up with companies that launched yesterday, using a regulatory model that DraftKings fought against in court on behalf of the state gambling industry it now partly competes with.