The Resilient Titans of Legal Gaming: DraftKings and Flutter's Path to Dominance and Profitability

The U.S. legal sports betting and iGaming markets are on a trajectory toward $30 billion in annual revenue by 2027, driven by rapid state-level legalization and consumer demand. At the forefront of this boom are DraftKings (DKNG) and Flutter (FLUT), whose combined market share exceeds 70% in key states like New York. Their dominance, however, is not merely a function of scale—it is the product of strategic resilience in navigating regulatory headwinds, operational efficiency, and a relentless focus on innovation.

Market Share: A Dual-Pole Dominance

In New York, DraftKings and Flutter's U.S. subsidiary, FanDuel, accounted for $1.55 billion of the $2.2 billion sports betting handle in April . DraftKings captured 33%, while FanDuel led with 37.4%, cementing their status as near equals in the sector. Nationally, FanDuel holds a 43% sports betting market share, while DraftKings trails at 37%, but their combined positions in states like New Jersey, Michigan, and Pennsylvania reflect entrenched customer bases.

The underscores their symbiotic yet competitive relationship. Both companies have leveraged their scale to negotiate favorable partnerships—FanDuel with the NFL and NBA, DraftKings with exclusive content and tech-driven user experiences—to deepen customer loyalty.

Regulatory Headwinds: Taxation and Adaptation

States like Illinois have imposed steep taxes (up to 29%) on sports betting revenue, squeezing margins. Yet DraftKings and Flutter have responded with operational agility. DraftKings, for instance, has prioritized markets with lower tax burdens, such as Missouri, while FanDuel has diversified into iGaming and international markets, including Canada and the UK.

This chart would show DraftKings' stock rebounding from pandemic lows, reflecting renewed confidence in its path to profitability. Flutter's stock, by contrast, has shown steady growth, buoyed by its global footprint and U.S. dominance.

The Path to Profitability: Growth and Cost Control

Both companies are nearing profitability through a mix of revenue diversification and cost discipline. DraftKings reported a record $1.42 billion in Q1 2025 revenue, a 53% year-over-year surge, while Flutter's U.S. segment grew 18% to $1.66 billion.

• DraftKings: Its focus on iGaming expansion—now legal in five U.S. states and Ontario—has driven a 14.5% YoY rise in iGaming revenue. The acquisition of Jackpocket Inc. has also broadened its customer base, though iGaming trails BetMGM's performance.
• Flutter: Leverages FanDuel's proprietary tech and international diversification (e.g., Italy's lottery) to offset U.S. regulatory risks. Its Q1 2025 iGaming revenue grew 32% YoY to $472 million, signaling potential to catch up to its sports betting dominance.

Both firms have also tightened operational costs. DraftKings' adjusted EBITDA improved by 40% in Q1, while Flutter's updated 2025 guidance projects $7.2–7.65 billion in U.S. revenue, a 123% EBITDA increase over 2024.

Risks and Opportunities

• Regulatory Uncertainty: Tax hikes and litigation (e.g., antitrust concerns) remain risks.
• Competitive Pressures: Caesars Entertainment and Entain-backed BetMGM are gaining traction in iGaming.
• Geographic Limits: iGaming is legal in only seven U.S. states, though both companies are poised to capitalize as more states follow.

Investment Thesis: Buy the Dominance, Mind the Risks

DraftKings and Flutter represent compelling long-term bets on a secular growth trend. Their scale allows them to weather regulatory storms and invest in innovation, while their financial trajectories suggest profitability is within reach.

• DraftKings: A “Buy” with a 12-month price target of $45 (up from $32). Key catalysts include Missouri's legalization and iGaming expansion.
• Flutter: A “Hold” with a 12-month target of $14.50 (vs. $13.80). Its global exposure and stable cash flows make it less volatile but less transformative than DraftKings.

Conclusion: The Pinnacle of Legal Gaming

DraftKings and Flutter are not just beneficiaries of the iGaming boom—they are its architects. Their ability to balance aggressive expansion with disciplined cost management positions them to dominate a market still in its infancy. Investors seeking exposure to a $30 billion industry should consider these titans, but with an eye on execution in new states and resilience against rising regulatory hurdles.

This graph would highlight the sector's exponential growth, reinforcing the companies' strategic positioning.

In the race to monetize legal gaming, DraftKings and Flutter are the clear leaders. The question now is not if they will profit, but how much—and whether they can sustain their edge in an increasingly crowded field.