DraftKings is bullish on new exchange, but questions remain on fee generation

DraftKings launched a new market-making division last week at a propitious time for prediction markets in general.

While the NFL regular season is still months away, the rollout of DraftKings’ proprietary prediction market exchange, DKeX, coincided with another significant event, the World Cup knockout stage. Bolstered by advanced pricing and algorithmic modelling, DraftKings is expanding its prediction market offering through the new internal market-making unit before the busy fall sports calendar begins again.

Given its army of data scientists and pricing expertise, DraftKings CEO Jason Robins gushed during its first-quarter earnings call that the company should theoretically become one of the world’s top three market-makers in the space. Robins is pleased with DraftKings’ inroads over an initial testing period, one that coincides with a recent benchmark when its prediction market topped $3 billion in annualised consumer volume. He is further encouraged by the synergies that could be achieved by integrating DraftKings Predictions, its prediction market arm, into the company’s newly launched “super app”.

“DKeX provides a vertically integrated foundation for DraftKings Predictions, strengthening our prediction markets content and capabilities, giving us greater control over the technology that powers those offerings, and enabling us to move faster as we continue enhancing our unified app,” he wrote in a statement.

Still, the launch raises questions about whether DraftKings can capture enough in trading fees to offset the considerable investment into prediction markets in 2026. The company has already cautioned that the investment could generate category losses of up to $300 million this year, an amount some analysts have described as conservative.

Explaining the fee structure

Last December, DraftKings formally entered the prediction markets arms race with the launch of DraftKings Predictions, a platform regulated by the US Commodity Futures Trading Commission. However, DraftKings’ partnerships with the CME Group and subsequently Crypto.com deprived the company of a key revenue opportunity through trading fees. Companies that serve as market-makers collect exchange fees on the trading volume, while capitalising on the bid-ask spread for a certain security.

The vast majority of the industry’s top players generate revenue through trading fees, while several stragglers are working on launching market-making divisions of their own. Over the spring, in the days leading to the NCAA Final Four, Polymarket released a new fee structure for its maker-taker model. Kalshi, meanwhile, employs a parabolic formula aimed at maximising liquidity. Under the model, limit orders for market-makers cost roughly four times less than market orders for takers.

A market-maker is an institutional firm that places orders that do not execute immediately, as the orders rest on what’s known as an order book. Conversely, market-takers execute those trades immediately against existing orders to ensure that the trades are delivered with reasonable alacrity. The fee structure at DraftKings appears to be comparable to the one utilised at Kalshi.

Trading fees at DraftKings: Market-takers are assessed anywhere from $0.005 to $0.01 per contract, depending on the contract price.

• Contract price: $0.01 to $0.19: $0.01 per contract
• Contract price: $0.20 to $0.96: $0.02 per contract
• Price of the contract: $0.97 to $0.99: $0.01 per contract
• Maker fee: $0.0025 per contract

Stock moves

Following last week’s announcement, shares in DraftKings jumped 11% to approximately $27.59 per share. Despite the surge, DraftKings is still down considerably from post-Super Bowl levels in 2025 when it traded in the low $50s. Nevertheless, some analysts believe that DraftKings could be on the verge of a rebound spurred by the exchange.

Market-making is widely viewed as a highly attractive endeavour, Citizens analyst Jordan Bender wrote in a research note, with gross margins approaching 95%. The launch of the exchange business represents a meaningful opportunity for DraftKings to drive EBITDA over the long term, as Citizens models $243 million of total market-making revenue in 2027. While DraftKings has already forecasted a 2026 prediction market investment of $200 million-$300 million, Bank of America estimates that the losses could reach $550 million, according to Bloomberg.

As the calendar turns to the second half of the year, analysts have described 2026 as a watershed year for prediction markets. Last week, Kalshi indicated that it is pursuing a new funding round that would assign a valuation to the company of $40 billion. Kalshi already received a $22 billion valuation earlier this year, which in itself doubled the one it received in 2025.

Soaring valuations across the space have also served as a catalyst for increased buzz on potential M&A activity. The introduction of vertically integrated platforms such as the new exchange from DraftKings have “set the stage” for increased M&A across exchanges, sportsbooks and consumer-facing firms, according to a Bernstein note published Monday.