DraftKings and Flutter Chase Market Maker Returns While Traditional Operators Sit It Out
DraftKings and Flutter used their Q1 2026 earnings calls to signal serious intent in prediction markets. DraftKings reported that its annualized predictions consumer volume exceeded $1 billion in April. Market making is already generating a positive return. Flutter is running a dual approach through FanDuel Predicts for customer acquisition in non-sportsbook states and market making on third-party platforms.
The split with traditional casino operators is clear. BetMGM, Penn Entertainment and Caesars Entertainment are avoiding the space. Some see it as a threat that lifts customer acquisition costs. Eighteen years on bookmaker trading floors taught one lesson above all others. Different operators see the same outcomes through very different P&L lenses.
DraftKings Targets Top-Two or Top-Three Market Maker Position
DraftKings leadership described market making as one of the fastest business lines to profitability the company has launched. The unit has already delivered a positive return. Management is aiming for a top-two or top-three position among market makers.
The company posted its first Q1 GAAP net income of $21.1 million. Adjusted EBITDA reached a record $167.9 million. Digital margins expanded 1,300 bps to 10.2 percent.
Revenue hit $1.646 billion, up 16.8 percent year over year. Monthly unique payers stood at 4.2 million. ARPMUP rose 21 percent to $131.
This is not theory. The trading economics are already showing up in the numbers. Prediction markets are moving from experiment to margin contributor inside one of the largest digital sportsbooks.
Flutter Runs Dual Tracks With Limited Cannibalization So Far
Flutter, owner of FanDuel, is pursuing customer acquisition in non-legal sports betting jurisdictions through FanDuel Predicts while simultaneously building market-making capacity on third-party platforms. The company began market-making services on the CME Group in April. It plans to expand to additional third parties in the coming months.
Leadership acknowledged the risk of cannibalization but said it has been limited. Proprietary pricing is viewed as the key to unlocking the market-making opportunity. The FanDuel Predicts app focuses on financial contracts, economic data and event-based sports markets.
Flutter reported revenue of $4.304 billion, up 17 percent year over year. US revenue reached $1.763 billion. Adjusted EBITDA for the group was $631 million.
The departure of FanDuel CEO Amy Howe adds pressure. The contrast with DraftKings execution is visible in the results. One operator is accelerating. The other is navigating internal change while testing the same waters.
Traditional Operators Treat Prediction Markets as a Competitive Threat
BetMGM delivered Q1 net revenue of $696 million, up 6 percent. Adjusted EBITDA was $25 million. Digital margin improved 110 basis points to 3.8 percent.
Leadership took a defensive posture. Prediction market firms are buying sports-betting keywords and media. This lifts CPAs and targets the same sports bettors BetMGM wants. The company believes its player economics and product remain stronger for most recreational players.
Caesars Entertainment posted net revenues of $2.870 billion. Caesars Digital revenue reached $374 million with adjusted EBITDA of $69 million, up from $43 million. Digital margin expanded 566 basis points to 18.4 percent.
Caesars pointed to its Rewards database as the main driver of customer acquisition. It sees itself operating outside the pools where prediction markets are inflating costs.
Penn Entertainment reported total revenue of $1.779 billion, ahead of the $1.75 billion consensus. The company is shifting emphasis toward digital entertainment with theScore Bet in high-margin markets. Alberta opening on July 13 is the near-term catalyst. Prediction markets are not part of the plan.
These operators are not ignoring the data. They are prioritizing the P&L mechanics that have worked for them. Recreational player retention, casino-first margins and loyalty databases sit at the center of their models.
Robinhood and CME Show Different Mechanics and Volume Shifts
Robinhood stood out among public companies. Other transaction revenue reached $147 million, up 320 percent year over year, driven primarily by event contracts. The company described itself as the largest retail brokerage in prediction markets. It plans to launch Rothera, a joint venture exchange with Susquehanna, later in the quarter.
Annualized event-contract revenue was approximately $415 million in Q1, or around $445 million before contra revenue. Funded accounts hit a record 27.4 million.
CME reported that 30 percent of trading volume on its prediction market operated with FanDuel has moved to market-based contracts covering equity, crypto, energy and metals instead of sports. This shift matters for liquidity and for how sportsbooks think about hedging flows.
Interactive Brokers pulled sports event contracts from its ForecastEx platform. Chair Thomas Peterffy described the category as potentially a huge thing with a lot of prediction trading. Long-term opportunity language met near-term product retreat.
The mechanics differ sharply. DraftKings and Flutter are building market-making books that sit alongside their sportsbooks. Robinhood is coming from retail brokerage with high-margin transaction revenue. Traditional operators see margin pressure without a clear path to offset it inside their existing player bases.
Risk and Counter-Argument
Prediction markets are not a universal margin lever. Rush Street Interactive delivered the clearest counter-example. Revenue reached $370.4 million, up 41 percent. Net income rose 134 percent to $26.2 million. Digital margin widened 400 basis points to 16.2 percent. North America ARPMUP hit $317, nearly 2.5 times DraftKings $131.
CEO Richard Schwartz stated that prediction markets today are primarily benefiting from sports event contracts, which is not an area of high priority for the company. Its casino-first strategy targets a different player profile.
JPMorgan analyst Daniel Politzer highlighted rising CAC and slower user growth at other operators and asked whether prediction companies might become a larger threat. RSI is not seeing the same pressure. A casino-heavy mix with disciplined acquisition can still outperform in the current environment.
Not every operator needs to become a market maker. The data shows multiple viable paths. The risk for those who lean in is execution. Market making requires different risk systems, different liquidity management and different regulatory tolerance than running a sportsbook. The operators who treat it as an add-on may discover the P&L math is harder than the earnings calls suggest.
The Bottom Line
Q1 2026 made the divergence concrete. DraftKings and Flutter are translating prediction market volume and market-making returns into margin expansion and faster profitability timelines. Traditional operators are protecting proven recreational economics and loyalty-driven acquisition. Robinhood is extracting high-margin transaction revenue from a brokerage base. The numbers are on the table. DraftKings digital margins at 10.2 percent after 1,300 bps of expansion tell one story. RSI at 16.2 percent with $317 ARPMUP tells another. World Cup 2026 will test which models hold up under real liquidity stress and cross-platform price visibility. The operators who understand both the sportsbook trading floor and the prediction market order book will hold the edge.
