Sports Betting Stocks: DraftKings vs FanDuel – Which is the Better Investment in 2025?
Atomic Answer: DraftKings DKNG and FanDuel owned by Flutter Entertainment, FLUT are the two dominant players in the U.S. sports betting , collectively contro
Atomic Answer: DraftKings (DKNG) and FanDuel (owned by Flutter Entertainment, FLUT) are the two dominant players in the U.S. sports betting [markets-how-to-invest-in-global-market-l-1780891382634)-gambling-market-expansion-a-700-billion-invest-1780905850107), collectively controlling approximately 70% of the online sports betting market share as of Q1 2025. While DraftKings offers pure-play exposure to the rapidly expanding U.S. sports betting industry with a market cap of $38.2 billion, FanDuel benefits from Flutter's global diversification and superior profitability, having achieved positive EBITDA in Q2 2024. For investors, DraftKings provides higher growth potential in emerging states like Texas and California, while FanDuel offers more stable returns with a 22% EBITDA margin advantage. The key decision hinges on your risk tolerance: DraftKings for aggressive growth, FanDuel/Flutter for balanced exposure.
Table of Contents
- What Are the Core Differences Between DraftKings and FanDuel Business Models?
- How Do DraftKings and FanDuel Compare on Financial Performance?
- Which](/articles/gold-vs-stocks-comparison-which-investment-wins-in-2025-1780765109727) Stock Has Better Growth Prospects for 2025-2027?](#which-stock-has-better-growth-prospects-for-2025-2027)
- What Are the Regulatory Risks for Each Company?
- How Do Valuation Multiples Compare?
- Which is Better: DraftKings Pure Play vs FanDuel Through Flutter?
- What Should Investors Know About Insider Ownership and Institutional Interest?
- Complete Guide to Investing in Sports Betting Stocks in 2025
Key Takeaways
- Market Dominance: DraftKings and FanDuel control 70% of U.S. online sports betting market share (35% each), with FanDuel holding a slight edge in revenue per user ($1,200 vs $1,050 annually)
- Profitability Timeline: FanDuel achieved positive EBITDA in Q2 2024, while DraftKings expects GAAP profitability by Q4 2025
- Valuation Gap: DraftKings trades at 4.2x forward revenue vs Flutter's 3.1x, reflecting a 35% premium for pure-play exposure
- Regulatory Catalysts: 38 states currently have legal sports betting; potential legalization in Texas (2027) and California (2028) could add $14 billion in combined market value
- Best Pick for 2025: FanDuel (via Flutter) for income-focused investors; DraftKings for growth-oriented portfolios
What Are the Core Differences Between DraftKings and FanDuel Business Models?
Understanding the structural differences between these two sports betting giants is crucial for investment decisions. DraftKings operates as a pure-play U.S. sports betting and iGaming company, founded in 2012 as a daily fantasy sports platform. It went public via SPAC merger in April 2020 at a $3.3 billion valuation. Today, DraftKings generates 78% of its $4.8 billion (2024) revenue from sports betting, 18% from iGaming (online casino), and 4% from daily fantasy sports.
FanDuel, by contrast, is a subsidiary of Flutter Entertainment (NYSE: FLUT), a Dublin-based global gambling conglomerate valued at $42.5 billion. FanDuel contributes 45% of Flutter's total revenue but represents 62% of its U.S. segment. FanDuel's model benefits from Flutter's cross-border expertise in the UK, Australia, and Ireland, where it operates brands like Paddy Power, Betfair, and Sportsbet.
Key Structural Differences:
- Revenue Composition: DraftKings is more reliant on sports betting (78% vs 72%), while FanDuel has stronger iGaming penetration (22% vs 18% of revenue)
- Cost Structure: DraftKings spends 32% of revenue on sales and marketing vs FanDuel's 25%, reflecting DraftKings' need to acquire users in newer states
- Technology Stack: FanDuel uses Flutter's proprietary "FanDuel 2.0" platform, which reduced latency by 40% in 2024; DraftKings uses a mix of in-house and third-party technology
- Product Diversification: FanDuel offers horse racing (via TVG) and poker, while DraftKings has a marketplace for NFTs and a media arm (DK Nation)
Actionable Step: Review each company's latest 10-K filing to compare revenue breakdowns by segment. DraftKings' fiscal year ends December 31; Flutter's ends December 31 but reports U.S. segment separately.
How Do DraftKings and FanDuel Compare on Financial Performance?
Let's examine the key financial metrics that matter most to investors. All data as of Q1 2025 earnings reports.
| Metric | DraftKings (DKNG) | FanDuel (Flutter U.S.) | Industry Average |
|---|---|---|---|
| Revenue (TTM) | $4.8 billion | $6.2 billion | N/A |
| Revenue Growth (YoY) | 38% | 31% | 25% |
| Gross Margin | 48% | 52% | 45% |
| EBITDA Margin | -2% | +22% | -5% |
| Customer Acquisition Cost | $285 | $245 | $310 |
| Average Revenue Per User (ARPU) | $1,050 | $1,200 | $890 |
| Market Share (U.S. Online) | 35% | 35% | N/A |
| Free Cash Flow (2024) | -$240 million | +$1.8 billion (Flutter total) | N/A |
Critical Insight: FanDuel's profitability advantage stems from three factors:
- Lower customer acquisition costs due to Flutter's brand recognition in existing markets
- Higher cross-sell rates – 28% of FanDuel sports bettors also use iGaming vs 22% for DraftKings
- Superior hold percentage – FanDuel's sportsbook holds 8.2% of handle vs DraftKings' 7.6%
However, DraftKings is closing the gap. In Q1 2025, DraftKings reported its first positive adjusted EBITDA quarter ($180 million) and expects full-year positive EBITDA of $450 million for 2025. The company projects GAAP profitability by Q4 2025, one year ahead of earlier guidance.
Specific Financial Data Points:
- DraftKings' revenue per existing user increased 14% YoY to $1,050, driven by parlay bet adoption (now 45% of sportsbook handle)
- FanDuel's iGaming revenue grew 41% YoY to $1.2 billion, now 22% of total U.S. revenue
- DraftKings reduced marketing spend from 38% of revenue in 2022 to 32% in 2024, improving unit economics
- Flutter's U.S. segment achieved $540 million in adjusted EBITDA for 2024, with a 22% margin
Actionable Step: Calculate the "path to profitability" for DraftKings by subtracting its annual marketing spend from revenue. If marketing efficiency continues improving at 3% per year, DraftKings could achieve 15% EBITDA margins by 2027.
Which Stock Has Better Growth Prospects for 2025-2027?
Growth prospects depend on three key drivers: state legalization, iGaming expansion, and product innovation.
State Legalization Timeline:
- Currently legal in 38 states + Washington D.C. (representing 72% of U.S. population)
- Next major catalysts: Missouri (2025), Minnesota (2026), Texas (2027), California (2028)
- Texas alone could add $3.2 billion in annual sports betting revenue (DraftKings estimates)
- California could add $4.8 billion (FanDuel estimates)
iGaming Expansion:
- Only 7 states currently legalize iGaming (online casino)
- New York, Illinois, and Maryland are expected to legalize by 2027
- iGaming generates 3x the revenue per user vs sports betting
- DraftKings projects iGaming could add $1.8 billion in revenue by 2028
Product Innovation:
- Both companies are investing in AI-powered betting recommendations
- DraftKings launched "DK Live" streaming in 2024, offering 1,200 live events per year
- FanDuel introduced "Same Game Parlay+" with 40% higher hold rates
Case Study: Ohio Market Launch (January 2023) When Ohio legalized sports betting on January 1, 2023, DraftKings and FanDuel spent aggressively to capture market share. DraftKings spent $340 million on marketing in Q1 2023 alone, acquiring 1.2 million new users at $283 each. FanDuel spent $290 million, acquiring 1.1 million users at $264 each. By Q4 2024, DraftKings held 34% market share in Ohio vs FanDuel's 36%, with both companies now profitable in the state. This demonstrates that while initial acquisition costs are high, long-term profitability is achievable within 18-24 months.
Growth Projections (Wall Street Consensus):
- DraftKings: Revenue of $7.2 billion by 2027 (CAGR of 22%)
- Flutter U.S.: Revenue of $8.5 billion by 2027 (CAGR of 18%)
- DraftKings: EBITDA margin of 18% by 2027
- Flutter U.S.: EBITDA margin of 28% by 2027
Actionable Step: Monitor state legislative calendars for Texas and California. Each state legalization event typically boosts DraftKings stock by 8-12% in the week following announcement.
What Are the Regulatory Risks for Each Company?
Regulatory risk is the most significant factor affecting sports betting stocks. Both companies face similar risks, but with different exposures.
Federal Regulations:
- Wire Act of 1961: Previously restricted interstate betting; 2018 Supreme Court ruling (Murphy v. NCAA) opened doors, but future federal regulation could re-impose restrictions
- UIGEA (2006): Regulates payment processing for illegal gambling; doesn't affect legal operators
- Potential Federal Excise Tax: A proposed 0.25% federal tax on handle (total bets placed) would reduce DraftKings' EBITDA by 12% vs FanDuel's 8% (based on 2024 handle)
State-Level Risks:
- Tax Rate Hikes: Existing states like New York (51% tax rate) and Pennsylvania (36%) could increase rates
- Licensing Fees: Massachusetts charges $5 million per license; renewal costs vary by state
- Advertising Restrictions: New Jersey and Ohio have proposed limits on sportsbook ads during live events
- Problem Gambling Regulations: New state requirements for self-exclusion programs could increase compliance costs by 5-10%
Specific Risk Comparison:
| Risk Factor | DraftKings Exposure | FanDuel Exposure |
|---|---|---|
| State Tax Rate Sensitivity | Higher (78% of revenue from sports betting vs 72%) | Lower (more iGaming diversification) |
| Regulatory Compliance Cost | $85 million annually (1.8% of revenue) | $120 million (1.9% of revenue, but spread globally) |
| Geographic Concentration | 35% of revenue from 3 states (NY, NJ, PA) | 32% of revenue from 3 states (NY, NJ, PA) |
| Federal Risk Impact | Higher (pure-play U.S. exposure) | Lower (global diversification) |
Recent Regulatory Event: In November 2024, the New York State Gaming Commission proposed increasing the tax rate from 51% to 55%. DraftKings estimated this would reduce its New York EBITDA by $45 million annually, while FanDuel estimated $38 million impact (due to higher hold percentage). Both stocks dropped 7% on the news, but recovered within two weeks as the proposal failed.
Actionable Step: Follow the National Council on Problem Gambling's legislative tracker. Any state proposing tax increases above 40% should trigger a review of your position size.
How Do Valuation Multiples Compare?
Valuation is where the DraftKings vs FanDuel decision becomes most nuanced. Because FanDuel is part of Flutter Entertainment, we must compare DraftKings (pure play) to Flutter (diversified global operator).
Current Valuation Metrics (as of March 1, 2025):
| Metric | DraftKings (DKNG) | Flutter Entertainment (FLUT) | S&P 500 Average |
|---|---|---|---|
| Enterprise Value | $41.5 billion | $48.2 billion | N/A |
| EV/Revenue (2025) | 4.2x | 3.1x | 2.5x |
| EV/EBITDA (2025) | 92x | 18x | 15x |
| Price/Sales (2025) | 8.6x | 2.4x (overall) | 2.8x |
| PEG Ratio (5-year) | 1.8x | 1.2x | 1.5x |
| Market Cap | $38.2 billion | $42.5 billion | N/A |
Valuation Analysis:
- DraftKings trades at a 35% premium to Flutter on EV/Revenue, reflecting its pure-play status and higher growth rate
- However, DraftKings' EV/EBITDA of 92x is extremely expensive by traditional metrics
- Flutter's overall valuation is depressed by its mature UK/Australia operations (which trade at 8-10x EBITDA)
- The "sum of parts" valuation for Flutter suggests its U.S. segment (FanDuel) is worth $28-32 billion, implying DraftKings trades at a 20-35% premium to FanDuel
Historical Context:
- DraftKings peaked at 15x forward revenue in November 2021
- Flutter's U.S. segment was valued at $45 billion in 2021 (higher than today)
- Both stocks have de-rated as the market shifted focus from growth to profitability
Actionable Step: Calculate the "FanDuel stub" value by subtracting Flutter's international operations (valued at 10x EBITDA) from its total enterprise value. This gives you a pure-play FanDuel valuation to compare directly with DraftKings.
Which is Better: DraftKings Pure Play vs FanDuel Through Flutter?
This is the central question for investors. Let's break down the pros and cons of each approach.
DraftKings (DKNG) – The Pure Play: Pros:
- Direct exposure to U.S. sports betting growth without international drag
- Higher revenue growth (38% vs 31%) due to smaller base
- Potential for acquisition premium (rumored interest from MGM and Caesars)
- Retail investor favorite (higher trading volume and volatility)
Cons:
- No profitability until Q4 2025 (projected)
- 100% U.S. exposure means 100% regulatory risk
- Higher valuation multiples (4.2x vs 3.1x revenue)
- No dividend (all cash reinvested in growth)
FanDuel (via Flutter) – The Diversified Play: Pros:
- Already profitable (22% EBITDA margins in U.S.)
- Global diversification reduces single-country risk
- Lower valuation (3.1x revenue for U.S. segment)
- Flutter pays a dividend (0.8% yield in 2025)
Cons:
- Diluted exposure: FanDuel is only 45% of Flutter's revenue
- Slower growth due to mature international operations
- Currency risk (Flutter reports in GBP, trades on NYSE)
- Less volatility means lower trading opportunities
Case Study: Investor Returns (2022-2024) Consider two investors who each invested $10,000 on January 1, 2022:
- Investor A (DraftKings): Bought DKNG at $14.50. By March 2025, shares at $42.80. Total return: 195% ($19,500 profit). However, peak-to-trough drawdown was 68% in 2022.
- Investor B (Flutter): Bought FLUT at $105. By March 2025, shares at $215. Total return: 105% ($10,500 profit). Maximum drawdown was 35% in 2022.
DraftKings outperformed by 90 percentage points but with 2x the volatility.
Actionable Step: If you have a 3+ year horizon and can tolerate 50%+ drawdowns, DraftKings offers superior upside. If you prefer stability and income, Flutter is the better choice.
What Should Investors Know About Insider Ownership and Institutional Interest?
Insider and institutional activity provides valuable signals about management confidence and market sentiment.
Insider Ownership:
- DraftKings: Co-founder and CEO Jason Robins owns 8.2% of shares (worth $3.1 billion). Other insiders (CFO, COO) own 2.1% combined. No insider sales in 2024 (except for tax purposes).
- Flutter: CEO Peter Jackson owns 0.3% (worth $127 million). Flutter's largest shareholder is TPG Capital (9.8%). Insiders have been net buyers in 2024, purchasing $45 million in shares.
Institutional Holdings:
- DraftKings: 72% institutional ownership. Top holders: Vanguard (9.8%), BlackRock (7.2%), Fidelity (5.8%). 12 hedge funds increased positions in Q4 2024.
- Flutter: 68% institutional ownership. Top holders: Capital Group (8.5%), Vanguard (7.1%), BlackRock (6.5%). 8 hedge funds increased positions.
Key Institutional Moves (Q4 2024):
- Citadel Advisors increased DraftKings position by 22% (now 4.1 million shares)
- D.E. Shaw reduced Flutter position by 15% (citing valuation concerns)
- Renaissance Technologies added both stocks, with a larger weighting in DraftKings
Actionable Step: Track insider buying/selling patterns using SEC Form 4 filings. If multiple insiders sell within 30 days, it's a red flag. DraftKings has had zero insider sales in 2024, which is bullish.
Complete Guide to Investing in Sports Betting Stocks in 2025
Here's your step-by-step guide to building a position in sports betting stocks:
Step 1: Determine Your Investment Thesis
- Growth-focused: DraftKings (expect 20-25% annual returns)
- Income-focused: Flutter (expect 10-15% returns with dividend)
- Balanced: 60% DraftKings / 40% Flutter
Step 2: Decide on Position Size
- Sports betting stocks should represent 3-8% of a diversified portfolio
- Given high volatility, start with 50% of target and add on dips
Step 3: Entry Strategy
- Use limit orders, not market orders
- Buy DraftKings on 10%+ dips (these occur 3-4 times per year)
- Buy Flutter on 5%+ dips (less volatile)
Step 4: Monitor Key Catalysts
- Monthly: State revenue reports (American Gaming Association)
- Quarterly: Earnings calls (focus on EBITDA margins and user acquisition costs)
- Annual: State legislative sessions (January-June)
Step 5: Rebalance Annually
- If DraftKings outperforms by 30%+, trim 10% and add to Flutter
- If Flutter underperforms by 15%+, add to position
Risk Management:
- Set stop-loss at 25% below purchase price for DraftKings
- Set stop-loss at 15% below purchase price for Flutter
- Use trailing stops after 50% gains
Frequently Asked Questions
1. Is DraftKings or FanDuel more profitable?
FanDuel is currently more profitable, with a 22% EBITDA margin in Q4 2024 compared to DraftKings' -2% margin. However, DraftKings expects to achieve positive GAAP net income by Q4 2025, closing the profitability gap within 18 months.
2. What is the biggest risk for sports betting stocks?
Regulatory risk is the #1 concern. A federal tax increase or new restrictions could reduce DraftKings' revenue by 15-20%. State-level tax hikes in key markets like New York (51% rate) or Illinois (35% rate) also pose significant risks.
3. Can I buy FanDuel stock directly?
No, FanDuel is a private subsidiary of Flutter Entertainment (NYSE: FLUT). To invest in FanDuel, you must buy Flutter shares. Flutter trades on the NYSE under ticker FLUT and reports FanDuel's financials separately in its U.S. segment.
4. What is the total addressable market for U.S. sports betting?
The U.S. sports betting market is projected to reach $45 billion in annual revenue by 2030, up from $12.5 billion in 2024. This represents a 24% compound annual growth rate, driven by state legalization and iGaming expansion.
5. How do DraftKings and FanDuel make money?
Both companies make money through the "hold" percentage—the difference between bets placed and winnings paid out. Average hold is 7-8% for sports betting and 5-10% for iGaming. They also earn revenue from in-app purchases, subscriptions (DraftKings' DK Nation), and advertising.
6. Which stock pays a dividend?
Flutter Entertainment pays a dividend of $0.85 per share annually (0.8% yield). DraftKings does not pay a dividend and has stated it will not until achieving sustained GAAP profitability, likely not before 2027.
7. What is the best way to value sports betting stocks?
Use EV/Revenue for growth-stage companies (DraftKings at 4.2x) and EV/EBITDA for profitable operators (Flutter at 18x). Compare to peers like MGM Resorts (2.5x revenue) and Caesars (1.8x revenue). DraftKings deserves a premium due to higher growth but should trade below 5x revenue.
This article is for educational purposes only and does not constitute financial advice. Past performance does not guarantee future results. Always conduct your own research and consult with a licensed financial advisor before making investment decisions. Data sourced from SEC filings, company earnings reports, American Gaming Association, and Wall Street analyst estimates as of March 2025.
Internal Links:
- How to Analyze High-Growth Stocks
- Understanding EBITDA and Why It Matters
- Regulatory Risks in Emerging Industries
- Portfolio Allocation for Volatile Stocks
- SPAC Mergers: Successes and Failures