Prediction markets are starting to cost FanDuel money, even if they aren't stealing many of its existing customers. That's the message from Flutter Entertainment's new CEO, Dan Taylor, who discussed growing competition from Kalshi and Polymarket during the company's third-quarter earnings report on Wednesday.
Taylor says FanDuel hasn't seen much disruption to its existing sportsbook business. The bigger headache comes from advertising, where prediction market platforms are spending aggressively to attract customers.
Kalshi and Polymarket Are Driving Up Marketing Costs
Getting someone's attention during football season has become more expensive. Taylor said industrywide marketing spending jumped more than 60% year over year in September and more than 50% in October, largely because prediction market operators are pouring money into advertising.
That creates an interesting problem for FanDuel. Even if its customers aren't leaving for Kalshi or Polymarket, the company must spend more to compete for the same audience. Taylor expects that pressure to continue into 2027. Flutter plans to increase marketing investment where it sees worthwhile returns, rather than chase competitors at any price.
FanDuel Predicts Finally Has Some Momentum
Taylor admitted FanDuel's prediction market product wasn't competitive earlier this year. Since then, the company has made changes, including adding Crypto.com sports contracts and combining its sportsbook and prediction offerings into one app. The numbers show improvement, although FanDuel still trails the industry's biggest exchanges.
- 140,000: Active FanDuel Predicts users in October.
- $119 million: Third-quarter prediction market trading volume.
- 102%: Quarterly increase in trading volume.
- 271%: October volume growth compared with July.
Those figures suggest FanDuel is finding an audience. However, Kalshi has regularly handled considerably more trading activity, leaving FanDuel with plenty of ground to cover.
The Real Opportunity Might Be Behind the Scenes
FanDuel isn't relying entirely on attracting individual traders. Flutter is also providing liquidity on prediction market exchanges, using its experience pricing sports-related contracts. Taylor expects that market-making business to generate approximately $50 million in revenue and $40 million in adjusted EBITDA during 2026.
He believes FanDuel's experience with complex, correlated sports outcomes gives it an advantage. That's an important distinction for anyone following this industry. FanDuel can potentially earn money from prediction market activity even when customers trade through competing platforms.
Customer Acquisition Remains the Tough Question
Taylor also acknowledged that prediction markets have different economics from traditional sportsbooks. FanDuel is acquiring prediction market customers at substantially lower costs, but their long-term value remains uncertain. The company sees particular promise in states that could eventually authorize online sportsbooks.
Building a customer base through FanDuel Predicts could give it a head start if those markets open. Meanwhile, Flutter reported $3.87 billion in quarterly revenue, up roughly 2%, while U.S. revenue increased 6%. The company nevertheless reduced its full-year financial outlook following disappointing results elsewhere in the business.
The Trade Handle Prediction Markets Take
FanDuel's position is revealing. Prediction markets apparently aren't taking much revenue from its existing sportsbook customers, but they're already making customer acquisition more expensive. We think the more interesting development is FanDuel's market-making strategy. Instead of needing to beat Kalshi at attracting traders, Flutter can participate in the activity happening across exchanges.
For now, FanDuel Predicts remains relatively small compared with Kalshi. But if Flutter can improve customer retention while earning money from liquidity provision, its prediction market business could become valuable without dominating trading volume.