DraftKings Is Expanding Beyond Traditional Sports Betting. Does Its Foray into Prediction Markets Make the Stock a Buy in 2026?

DraftKings (NASDAQ: DKNG) is making a good business decision by expanding into prediction markets. That, however, doesn't make this stock a buy in 2026. At least not if you have a long-term buy-and-hold mentality.

Here's why buying this sports betting company just because of its move into prediction markets could be a mistake.

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What does DraftKings do?

DraftKings is one of the big players in sports betting. That's a relatively new investment opportunity, though the term investment needs to be taken with a grain of salt. The investment opportunity is for DraftKings, not for the customers who use its service. The service DraftKings is offering is the ability to gamble on sports online.

The move into prediction markets is really just a logical extension of the company's focus on gambling. While prediction markets aren't billed as gambling, they are win/lose wagers on specific event outcomes. Only the events in question go well beyond sports to include things like the weather, economic activity, and political outcomes. It would be foolish of DraftKings to miss out on the opportunity to expand its business by offering access to prediction markets.

The positive of this setup is that you can watch the prediction market to get a sense of what the future may hold. The downside is that people are basically just gambling on the outcome of an event that isn't tied to sports.

The big-picture risk that investors have to consider

The problem with owning a gambling business was actually highlighted by DraftKings competitor FanDuel, which is owned by Flutter (NYSE: FLUT). Flutter just reported weak fourth-quarter 2025 earnings, with the CEO telling CNBC that discouraged gamblers tend to stop betting.

This is the core problem with DraftKings' entire business model. Right now, people see sports betting and prediction markets as lucrative. If there is a recession and money gets really tight, many current DraftKings users will likely have less cash with which to gamble. They will, in general, get discouraged by broader economic conditions. If the company's users stop using the service, as FanDuel experienced, it won't be good news for DraftKings.

Good in the short term, more risk in the long term

Leaning into what amounts to more betting is absolutely the right move for DraftKings' business. It might even lead to notable short-term growth for the business. The problem is that it simply doubles down on the big long-term risk that should keep investors awake at night: When consumers become risk-averse, gambling and prediction market activity could dry up very quickly. Conservative investors should probably avoid DraftKings.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool recommends Flutter Entertainment Plc. The Motley Fool has a disclosure policy.