In a recent discussion, CNBC’s Jim Cramer expressed optimism regarding DraftKings, suggesting that recent declines in the stock may create a potential buying opportunity. Cramer reassured investors that fears surrounding competition from online prediction markets should not deter them from considering DraftKings. He stated, “I’m not backing away from this stock… you’ve got my blessing right here to put on a small position.”
Despite a solid quarterly report in August, DraftKings’ stock has plummeted over 20% since its September highs. Cramer acknowledged the competitive landscape, pointing to online prediction markets like Polymarket and Kalshi, which allow users to bet against one another on various events including sports and political outcomes. According to Cramer, the perceived advantage of these platforms is their lack of regulation. Unlike traditional sportsbooks, which must adhere to stringent state regulations, prediction markets operate more like stock exchanges and are not classified as gambling.
However, Cramer emphasized that the concerns regarding prediction markets may be overstated. He noted that their offerings are relatively limited compared to what DraftKings provides. Furthermore, he pointed out that many of these markets operate in states where sports betting remains illegal, making it uncertain whether they are genuinely siphoning customers away from DraftKings. Cramer referenced an analyst note from Jefferies indicating that a significant portion of Kalshi’s business comes from states like Texas and California, where DraftKings currently does not operate.
Additionally, Cramer highlighted findings from Oppenheimer analysts, which suggested that 40 to 50% of Kalshi’s trading volume is linked to Robinhood users—typically newcomers to the sports betting scene. This trend could potentially benefit established sportsbooks like DraftKings in the long term, similar to the way ESPNBet attracted users who later transitioned to platforms such as DraftKings and Flutter’s FanDuel.
Cramer also pointed out that prediction markets face their own legal challenges, with several currently embroiled in lawsuits from various states. He cautioned investors about the uncertain future of these platforms and the possibility of increased regulation. “There’s a reason why the online sportsbooks haven’t gotten into prediction markets—they’re probably worried that when the regulators finally come down on these platforms, they’ll come down hard.”
In summary, Cramer believes that while DraftKings is currently facing challenges, the underlying fundamentals of the company and its competitive advantages could provide a solid investment opportunity, especially as the landscape of sports betting evolves. DraftKings, however, has chosen not to comment on these developments.
