FanDuel appears to be facing a key decision for its prediction market product, as Dan Taylor, CEO of parent company Flutter Entertainment, said the business will soon get a “clearer view” of whether it should spend on prediction markets as a source of profit in their own right or as a means to pick up customers in states that may soon legalize sportsbooks.
Taylor was speaking on the company’s third-quarter earnings call Wednesday.
It was his first earnings call as CEO, after Peter Jackson stepped down on Sept. 30. Taylor was previously president of Flutter and CEO of its international division.
In a note to clients Wednesday, Jefferies analysts said Taylor’s priorities were, “1) Building on US leadership position; 2) Capture the prediction markets opportunity; 3) Drive more value from the International portfolio; and, 4) Simplify the operating model.”
Taylor is not the only new face in a leading position at Flutter, as FanDuel CEO Amy Howe left the business in May. Howe was replaced by Christian Genetski on an interim basis. Genetski has reportedly been named permanent FanDuel CEO now.
Key months ahead for predictions
Taylor said that ultimately Flutter was trying to find the balance of how much to spend in prediction markets. The lower-margin business model can make customer lifetime values different from those at a sportsbook.
“It’s hard to get the balance right in terms of the economics there,” he said. “We’re acquiring at materially lower CPAs [costs per acquisition] than our sportsbook, and we can see a pathway to materially improving the LTVs [lifetime values] as we go forward. There’s lots of things we can do to keep improving the economics, but they are uncertain. We need to be disciplined about the returns we get.”
He added that the business was more confident about the long-term returns in states that may soon legalize sportsbooks, suggesting that for FanDuel, getting customers into its database and downloading its app in the event of sportsbook legalization are key parts of its prediction market strategy.
For states where sportsbook legalization may still be far away, Taylor said Flutter should get a clearer view soon on how much it can spend to acquire new prediction market customers.
“I think we’re confident about better returns in states where we have a higher prospect of OSB,” Taylor said. “That gives us more certainty. But as the economics and the player behaviors start to evolve over the next few months, I think we’ll get a clearer view on how much we can spend economically on the B2C side.”
FanDuel Predicts performance so far
Flutter launched FanDuel Predicts in December, initially offering contracts from traditional commodities giant CME. When it launched, FanDuel said it would take a loss of between $40 million and $50 million on prediction markets in 2025. That would then increase to between $200 million and $250 million in 2026.
However, early take-up of the product was slow.
“Being candid, the product when I first went over to FanDuel in the spring was not competitive,” Taylor said.
In June, FanDuel Predicts started offering Crypto.com contracts, and it fully switched to Crypto.com for all sports contracts in August. In September, FanDuel launched a unified app for its sportsbook and prediction market.
“I think the team have made tremendous progress on the product in the last few months, and the pace of delivery has really, really impressed me,” Taylor said. “And the results we’re seeing are very good.”
However, volume appears to still lag well behind not only market leader Kalshi, but also traditional rival DraftKings — which has leaned further into prediction markets than FanDuel — and other members of the chasing pack.
FanDuel reported $119 million of prediction market volume in the third quarter. That total was eclipsed by DraftKings on a single day at least three times during the quarter, on each of September’s NFL Sundays. At times during the quarter, Kalshi exceeded $119 million in volume in the space of half an hour.
Taylor said October prediction market “almost trebl[ed]” in October compared to July. Over the same time period, Kalshi’s volume more than doubled despite starting from a base around 1,000 times higher.
Market making success
But aside from offering prediction market contracts to customers, FanDuel is also market making on the exchanges, and having success doing so. Taylor said that the business expects to make $50 million in revenue and $40 million in adjusted earnings before interest, tax, depreciation, and amortization (adjusted EBITDA) from market making this year.
He said that the business has an advantage in pricing same-game parlays on prediction markets because it has done so for years as a sportsbook.
“I think with our expertise particularly on correlated events markets, parlays, and complex products, we certainly see an advantage for us in this space,” Taylor said.
PMs impacting marketing spend, not revenue?
Taylor reiterated former Flutter CEO Peter Jackson’s claims from past Flutter results that prediction markets were not cannibalizing sportsbook revenue.
However, he said that they are competing with FanDuel in terms of advertising, raising the company’s marketing costs.
“We continue to see a limited impact from prediction markets on the betting activity of our existing customer base, which I believe, and our consumer research affirms, reflects the superior proposition offered by sportsbooks,” he said. “We are, however, beginning to see an impact on our overall media costs as prediction market operators increase marketing spend. The duration of this trend will depend in part on how the regulatory landscape develops, but at this early stage, we expect our marketing intensity to continue in 2027 at levels similar to this year.”
Flutter Chief Financial Officer Rob Coldrake said marketing costs rose by 50% or more in the opening months of the NFL season.
“I think we have seen in Q3 this year in particular elevated media spend across the category. I am thinking here about sort of brand marketing, digital marketing, etc.,” he said.
“That, as a category, was up more than 60% year-on-year in September, up more than 50% year-on-year in October, primarily driven by investment from some of the predictions operators.”
Flutter Q3 results
Flutter’s U.S. revenue for the third quarter came to $1.46 billion, up 6.4% year-on-year. The FanDuel sportsbook made up $817 million, with $572 million from iGaming and $66 million from other sources, including market making, FanDuel Predicts, and horse racing. The $817 million in sportsbook revenue came on $12 billion worth of handle.
Flutter just about achieved positive adjusted EBITDA for the quarter, at $3 million.
Flutter as a whole recorded a net loss of $1.15 billion for the quarter, mostly due to having to write down the value of its Brazilian business after the country banned online gambling.
The business reported revenue of $3.87 billion and adjusted EBITDA of $360 million. It cut its full-year adjusted EBITDA guidance by $160 million to $2.495 billion, mostly due to Brazil and U.S. sports results. The Jefferies team described the downgrade as “no surprise.”
Flutter shares were roughly flat as of 1 p.m. ET, as markets digested both the financial results and the midterm elections. They are still down 61.7% this year.
