FanDuel Ponders Prediction Market Spending, Assesses Profit Potential

Flutter Entertainment has decided to reconsider just how much it is willing to inject into prediction markets, weighing their potential to generate standalone profits against their value in attracting future sportsbook customers. The announcement comes at a particularly important time for FanDuel as competition keeps intensifying and operators are spending more aggressively to gain market share. More Clarity Expected Speaking during Flutter’s third-quarter earnings call on Wednesday, November 4, chief executive officer Dan Taylor said the company expects the upcoming months to bring more clarity on its understanding of the economics of its prediction market business. The main question is whether FanDuel Predicts has what it takes to become a profitable operation in its own right or whether it can solely serve as a means of building a customer base in states that may eventually legalize online sports betting. Taylor said customer acquisition costs in prediction markets are considerably lower than in traditional sports betting. However, the lower-margin business model makes it harder to calculate long-term customer value and determine how much the company should spend to attract new users. He added that Flutter sees stronger potential returns in states where sportsbook legalization is more likely, since customers acquired through FanDuel Predicts could eventually move into its sportsbook platform. FanDuel Continues to Trail Big Competitors When it launched its prediction market in Secember 2025, FanDuel initially started offering contracts through CME. Nonetheless, Taylor admitted that the product was not competitive when he first took a closer look at it in the spring. The company subsequently introduced Crypto.com contracts in June, moved all sports contracts to Crypto.com in August and launched a unified app combining its sportsbook and prediction markets in September. The changes appear to be gaining traction. FanDuel recorded $119 million in prediction market trading volume during the third quarter, while Taylor said activity in October was almost three times higher than in July. Despite the improvement, the company remains far behind Kalshi and DraftKings in trading activity. Market-Making Offers Another Revenue Stream Flutter is also generating income by providing liquidity and pricing contracts on prediction market exchanges. Taylor expects this market-making operation to produce $50 million in revenue and $40 million in adjusted EBITDA during 2026. He pointed to FanDuel’s experience pricing same-game parlays and complex betting combinations as a competitive advantage, particularly in markets involving correlated events. Meanwhile, prediction markets have started to impact another part of Flutter’s business, namely, its advertising. Chief financial officer Rob Coldrake said category-wide marketing spending increased more than 60% year-on-year in September and over 50% in October, largely driven by prediction market operators. Flutter expects marketing intensity to remain at similar levels in 2027.