For the most of the last year, prediction markets have seemed to pose a threat to conventional bookmakers.

DraftKings (DKNG) may be able to transform that danger into an opportunity, according to Investor’s Business Daily, citing TheFly. Bank of America analyst Julie Hoover upgraded DraftKings to Buy and kept a $27 price target, it reported.

Hoover said the stock’s roughly 47% decline this year has created a more attractive entry point and described prediction markets as increasingly a “win-win” for DraftKings.

Following a difficult period for DraftKings shares, the tone has changed. After closing at a 2026 low on Friday, Oct. 2, the stock increased 5.4% on Monday, Oct. 5, although it is still down more than 40% for the year.

The analyst call is therefore more noteworthy than the rating adjustment.

The positive argument may now include one of the main competitive issues DraftKings was facing.

Prediction markets could become another DraftKings business

Prediction markets have given customers another way to gamble on results, but DraftKings has spent years establishing its place in online sports betting.

DraftKings now offers DraftKings Predictions, which allows qualified clients to trade event contracts related to politics, sports, financial markets, and other actual events.

In contrast to a regular sportsbook bet, prediction markets often let users purchase and sell contracts depending on whether an event will occur.

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DraftKings formally entered the market with its stand-alone Predictions platform in December 2025. The program, according to the corporation, would first link users to many exchanges and function under the supervision of the Commodity Futures Trading Commission.

Hoover sees DraftKings’ prediction-market presence becoming more robust, Investor’s Business Daily reported, citing TheFly.

The firm estimates DraftKings could eventually generate hundreds of millions of dollars from prediction-market fees and market-making activity, according to Investopedia. Bank of America analysts said they expect about $400 million in fees in 2027, with another $200 million to $400 million potentially coming from market making.

As a result, the investment case that previously dominated worries about the industry has drastically changed.

Prediction markets were primarily seen as a competitive threat that might circumvent the state-by-state sports betting system that businesses like DraftKings had spent years developing.

DraftKings now has a product of its own. This implies that rather than simply displacing customers from the company’s sportsbook, expansion in prediction markets may provide a new source of income.

DraftKings finds a new edge in prediction markets.

Smith Collection/Gado / Getty Images

DraftKings still faces a major regulatory question

There is risk associated with this opportunity.

The conventional gambling sector has fiercely opposed prediction markets, especially as platforms broaden their sports-related offers. The American Gaming Association (AGA) has argued that prediction-market operators are effectively offering sports betting outside the regulatory structure used by state-licensed sportsbooks.

AGA estimates Americans will legally wager $29.5 billion on the 2026 NFL season through regulated commercial sportsbooks, roughly flat from $29.4 billion last season, according to its statement.

Prediction-market firms have also come under fire from the AGA for marketing sports contracts as investments rather than gambling goods.

Due to the uncertainty surrounding the final regulatory status of prediction markets, DraftKings is affected by this disagreement. However, Bank of America sees potential benefits under several scenarios, Investor’s Business Daily reported, citing TheFly.

DraftKings may take part with its own prediction platform if the market continues expanding.

One of the competitive risks affecting DraftKings’ conventional sportsbook business may diminish if courts or regulators eventually impose restrictions on sports prediction markets.

This helps to explain why prediction markets are now seen by Bank of America as possibly advantageous rather than just disruptive. It also gives investors yet another incentive to keep a close eye on the regulatory struggle.

For DraftKings, the concern is no longer whether sportsbooks will lose market share to prediction markets. It concerns whether the firm can use its current clientele, brand, and technology to establish itself as a major force in both industries.

Wall Street sees room for DraftKings to recover

The boost from Bank of America comes after investors severely penalized DraftKings shares.

As investors consider rising competition, investment in new products, and uncertainties surrounding prediction markets, DKNG stock has dropped more than 40% in 2026 and has traded significantly below levels attained last year.

Hoover believes much of that concern is now reflected in the stock price, according to Investor’s Business Daily via TheFly.

The firm’s $27 price target indicates that the analyst believes DraftKings’ 2027 projections may be at their lowest point and represents a substantial rise from the stock’s previous levels.

DraftKings returns to one of the most significant times on the sports-betting calendar with the start of the NFL and college football seasons. But over time, the potential of prediction markets could become more important.

DraftKings has previously shown its ability to attract and profit from online sports bettors. Another area where the business may be able to use the same technology, customer connections, and brand awareness is prediction markets.

If authorities, judges, and gaming associations continue to argue about how to handle such items, it will be difficult for DraftKings to get involved.

The uncertainty has weighed on the stock, but Hoover sees the sell-off as creating a more attractive entry point.

DraftKings has a chance to get involved if prediction markets continue to grow. Pressure on its primary sportsbook operation may lessen if the regulatory climate finally places restrictions on them.

Such a scenario makes one of DraftKings’ greatest risks more manageable.

Bank of America believes that investors may finally receive compensation for taking that risk after a drop of almost 40% this year.

Related: BofA reveals $3 billion reason to watch DraftKings now