More Problems at DraftKings (DKNG)
Two weeks ago, The Bear Cave published “Problems at DraftKings (DKNG)” and wrote:
“The Bear Cave believes prediction markets are a real and growing headwind for DraftKings and will turn an effective duopoly into a competitive marketplace with DraftKings on the defensive.”
Since then, prediction markets have gone mainstream. South Park dedicated an episode to prediction markets and the Wall Street Journal highlighted Kalshi’s rise in football betting. And on Monday, Kalshi rolled out its first real push into parlays, which are the most profitable segment of traditional sportsbooks. Volume on prediction markets has continued to explode and the imminent launch of Polymarket, another prediction market platform that plans to offer sports betting, will only accelerate the trend.
The Bear Cave believes investors in DraftKings (NASDAQ: DKNG — $17.5 billion) are underestimating the long-term threat posed by prediction markets.
Compared to DraftKings, prediction markets often offer better odds, more liquidity, unrestricted live game betting, better cash-out options, and unlock a world of additional betting possibilities within sports and beyond.
Unlike DraftKings, prediction markets do not restrict the activity of winning bettors. And while traditional sportsbooks spend billions on advertising and partnerships, prediction markets get billions in free media exposure and social buzz.
In a podcast interview with Odd Lots released yesterday, Kalshi CEO and co-founder, Tarek Mansour, said in part,
“The sports side has grown… I am shocked, I am still shocked. Every week we do a forecast and we beat it. America likes football. More than expected…” (13:23)
“I think a market based model for these markets is just better than the over the counter sportsbook model because the odds are better, anyone can be a price bidder they don’t need to be a price taker. And the results show the percentage of people that lose on Kalshi is closer to 50/50, that’s just not the case in a traditional sportsbook. And I think that’s the argument that wins it long term, which is it’s just better. You get better prices, more transparency, and the ability to influence and participate compared to a traditional model.” (17:27)
The Bear Cave previously documented how Kalshi offers better odds than DraftKings for most football games. It appears that this pattern is repeating with Kalshi’s newly launched same game parlay offering.