Bank of America upgrades DraftKings to Buy as prediction markets become a bigger piece of the model

DraftKings shares rose about 5% after Bank of America upgraded the sports betting company from Neutral to Buy, with analyst Julie Hoover pointing to the growth potential of prediction markets. For PSPs and other payment players, the useful part is not the stock move itself but the direction of travel: a business line that can bring different revenue mechanics, different customer flows, and a different regulatory setup than state-licensed sportsbooks.

1. Bank of America kept its $27 price target for DraftKings, even after the stock had fallen about 47% over the prior year. The upgrade was tied mainly to expectations for DraftKings’ prediction market business, which the bank said could become a significant source of revenue.
2. The bank estimates DraftKings could generate around $40 million in prediction market fees in 2027 if the business remains viable. It also sees an additional $200-$400 million from market-making activities, which is the part that matters if you are thinking about where liquidity, settlement flow, and operational volume could show up.
3. DraftKings entered the prediction market space a year ago in October after buying Railbird Technologies Inc. and its subsidiary Railbird Exchange. Since then, the company says more than 600,000 customers had used DraftKings Predictions by August, according to its second-quarter investment letter.
4. Trading activity has scaled fast. Annualized trading volume rose from $2.3 billion in April to $11 billion in July. Consumer trading accounted for $3.6 billion on an annualized basis, while market-making volume reached $7.4 billion.
5. Bank of America cut its 2026 EBITDA forecast for DraftKings from $635 million to $500 million, citing higher costs tied to building the prediction market business. At the same time, it raised its 2027 EBITDA estimate from $1.05 billion to $1.15 billion, reflecting stronger sportsbook performance and potential market-making revenue.

The broader context is that prediction markets are becoming part of the US gambling-and-financial-markets debate. Platforms such as Kalshi have expanded nationally under federal regulation, allowing event contracts in states where traditional online sports betting is not available. That puts DraftKings in a familiar but awkward spot: a company with a large customer base and established trading infrastructure, but also exposure to a regulatory structure that does not map neatly onto sportsbook rules.