Fitch Ratings has assigned a 'BBB-?' long-term rating with a Recovery Rating of 'RR1' to DraftKings Inc.'s proposed first-lien term loan B to be issued by its subsidiary DK Crown Holdings Inc.
Proceeds from the term loan are expected to be used for general corporate purposes and to repurchase a portion of the company's existing senior unsecured convertible notes due in 2028.
DraftKings' 'BB+' Issuer Default Rating (IDR) reflects its leading market position in U.S. online gaming, conservative net leverage, strong liquidity and robust expected FCF generation. The ratings are constrained by the company's limited diversification, exposure to the more volatile online gaming segment, a competitive promotional environment and regulatory risks associated with the evolving online gaming and prediction markets landscape.
Key Rating Drivers
Transaction Increases Leverage Temporarily: The proposed senior secured term loan B modestly increases DraftKings' gross leverage and temporarily limits rating headroom. On a pro forma LTM basis at close, leverage will be above Fitch's 3.5x negative sensitivity. Fitch expects the increase to be temporary and expects leverage to decline to about 3.1x by YE 2026, with Fitch's forecasted EBITDA at the lower end of management's guidance range, supported by continued revenue growth and margin expansion. Fitch forecasts EBITDA leverage will improve to the low-2x range in 2027 and fall below 2.0x thereafter.
Prediction Markets Opportunity Brings Risk: DraftKings' decision to enter the prediction markets space increases credit risk through a potential rise in marketing spend for customer acquisition costs in 50% of the country previously barred from participating in regulated online sports wagering. Fitch expects disciplined incremental spending and anticipates meaningful synergies from existing national advertising investments. Should competitive intensity increase, higher marketing outlays could erode profitability.
DraftKings' decision to enter prediction markets exposes it to heightened regulatory scrutiny. The company must manage relationships with regulators in existing and potential jurisdictions. Prediction markets offerings in states where sports betting is not yet legal, some of which are engaged in active litigation against prediction markets operators, could jeopardize future and existing relationships in its core online sportsbook business. This risk is partially mitigated by the decentralized nature of U.S. gaming regulation, as regulatory backlash would occur piecemeal and vary by state.
Sports Betting Earnings Volatility: Online sports betting (OSB) is less stable than iGaming due to the unpredictability of sports betting outcomes due to various factors. DraftKings benefits from an OSB presence across 31 jurisdictions in the U.S. and Canada. However, these jurisdictions exhibit similar betting trends linked to major U.S. sports, where nationally televised games may have an outsized impact on quarterly handle and hold. While parlays increase structural hold, they also appear to increase the volatility of hold across individual events. Diversification into the less volatile iGaming or global OSB can mitigate the impact of high-profile events on earnings.
Market Leader: DraftKings benefits from its leading gross gaming revenue (GGR) share in both iGaming and OSB. Fitch sees limited risk of cannibalization from prediction markets and considers the industry as complementary to DraftKings' business model. As a market leader, the company benefits from its substantial user base and wide offering, resulting in lower customer acquisition costs.
Strong Cash Generation: Fitch expects DraftKings' FCF margins to increase to approximately 10% by 2027 and thereafter from 8.4% in 2025. DraftKings benefits from minimal interest expense, net operating loss carryforwards and a negative working capital cycle financed by customer deposits. Fitch anticipates these cash flows to support shareholder returns through share buybacks and continued investment in growth.
High Growth Boosts Margins: Fitch forecasts DraftKings' revenue will grow by 8% and 18% in 2026 and 2027, respectively, followed by high single-digit growth thereafter, assuming no new online betting legalizations or prediction markets revenue under the base case. Revenue growth will be driven primarily by high single-digit handle growth and an increase in hold driven by increased parlay utilization. Fitch also expects DraftKings' active user growth will improve as existing jurisdictions continue to expand and DraftKings cross-markets across platforms. These growth levers result in high flow-through to EBITDA, driving margin expansion.
Competitive Promotional Environment: Despite DraftKings' market-leading position, the promotional environment remains competitive. Fitch expects marketing spend to remain elevated and increasing. However, as the company continues to scale at a faster rate, Fitch expects sales and marketing spending to decline as a percentage of revenue to below 20% from 33% in 2023. This forecast assumes a rational competitive environment in states with prediction markets and normalizing environment in sportsbook states.
Fiscal and Regulatory Risks: DraftKings benefits from OSB and iGaming legalization trends. However, the company faces risks from tax legislation and potential reputational concerns that could lead to increased scrutiny and regulatory challenges. Several states, including Illinois and New Jersey, have implemented material tax hikes. Continued fiscal pressures may pose a substantial financial and competitive burden on DraftKings and other operators.
Peer Analysis
DraftKings holds a strong position in the U.S. online gaming market, supporting its 'BB+' IDR and Stable Outlook. Its peer FanDuel, owned by Flutter Entertainment plc (Flutter; BBB-/Stable), is larger and more diversified, leading in both the U.S. and global markets. Entain plc (BB/Stable) is another key competitor more diversified than DraftKings despite having lower market share. evoke plc (B/Rating Watch Positive), a similar but smaller-scale business, exited the U.S. market in early 2024. DraftKings' rating benefits from a more conservative leverage profile.
Fitch expects DraftKings' EBITDA margins to improve to 17% by 2029, positioning the company in line with its peers. This growth is fueled by increased hold and scale with high flow-through to EBITDA. The company shows strong financial performance. However, the company faces challenges from less geographic diversification compared with Flutter and is more susceptible to volatility due to its strong focus on the sports sector.
Fitch anticipates DraftKings' leverage will remain low, benefiting from minimal debt exposure and robust cash generation, which supports its strategic initiatives. This financial strength contrasts with some peers and allows DraftKings to invest heavily in marketing and innovation to maintain its competitive advantage in a dynamic and evolving industry landscape.
Fitch's Key Rating-Case Assumptions
Revenue growth from 2026-2029 is driven by continued expansion in U.S. online sports betting and iGaming, broadly stable sportsbook market share in the low-to-mid-30% range and improved monetization. Fitch forecasts revenue growth in the high-single-digit to high-teens range over the period, moderating to high-single digits by 2028-2029 as jurisdictions mature;
User growth remains positive but slows as the customer base scales, which reflects higher market penetration and less benefit from new jurisdiction launches;
Fitch assumes no benefit from prediction markets in its base case;
Average revenue per customer increases over time as cohorts mature and promotional intensity remains disciplined;
Sportsbook monetization improves over the forecast period, supporting higher revenue stability and contributing to margin expansion, without relying on unusually favorable sports outcomes;
iGaming growth remains strong through 2029, generally in the high-single-digit to low-double-digit range;
Margin expansion is gradual and driven primarily by operating leverage and improved sportsbook monetization rather than material cost reductions. Fitch forecasts EBITDA margins improving from about 11% in 2026 to about 17% by 2029;
Sales and marketing spending increases modestly in absolute terms but declines as a percentage of revenue as customer acquisition and retention become more efficient with scale;
Cash taxes increase over the forecast period as the company utilizes net operating losses, exceeding $100 million by 2029;
FCF margins improve from the high-single-digit range in 2026 to about 12% by 2029;
Fitch assumes the company refinances its 2028 convertible notes with unsecured cash-pay debt ahead of maturity, increasing interest expense, though EBITDA interest coverage remains above 10x through 2029;
Fitch assumes continued share repurchases throughout the forecast period while maintaining strong liquidity;
Cash balances remain robust and build to about $1.7 billion by 2029 despite shareholder returns;
Fitch assumes no material acquisitions in the forecast;
SOFR assumptions are consistent with market forward rates.
Corporate Rating Tool Inputs and Scores
Fitch scored the issuer as follows, using our Corporate Rating Tool (CRT) to produce the Standalone Credit Profile (SCP):
Business and financial profile factors (assessment, relative importance): Management (bb+, Moderate), Sector Characteristics (b+, Higher), Market and Competitive Positioning (bbb-, Higher), Diversification and Asset Quality (bb, Moderate), Company Operational Characteristics (bbb-, Moderate), Profitability (b+, Moderate), Financial Structure (bbb+, Higher), and Financial Flexibility (bbb+, Moderate).
The quantitative financial subfactors are based on standard CRT financial period parameters: 20% weight for the latest historical year 2025, 40% for the forecast year 2026 and 40% for the forecast year 2027.
The Governance assessment of 'Good' results in no adjustment.
The Operating Environment assessment of 'aa-?' results in no adjustment.
The SCP is 'bb+'.
To derive the IDR:
No adjustments to the SCP resulting in an IDR of 'BB+'
Recovery Analysis
Fitch applies the generic approach for issuers in the 'BB' rating category. Under this approach, Fitch equalizes the IDR and unsecured debt instrument ratings when average recovery prospects are present, according to Fitch's Corporates Recovery Ratings and Instrument Ratings Criteria. This is because issuers rated 'BB-?' and above are considered too far from default for a credible default scenario analysis to be generated, which would likely result in recovery ratings that are excessively high across all instruments.
The generic approach considers relative instrument rankings and expected recoveries when assigning a recovery rating. The approach also considers the higher enterprise valuation associated with 'BB' ratings, which generally benefits the most senior instruments.
Fitch classifies DraftKings' revolving credit facility (RCF) and its senior secured term loans as Category 1. Given the 'BB+' IDR, the Category 1 first lien senior secured debt is notched up one level to 'BBB-?'/'RR1'.
The unsecured debt is equalized at 'BB+'/'RR4'.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
Sustained EBITDA leverage above 3.5x;
Change in promotional environment leading to expectation of increased spend on sales and marketing and/or promotions. This could be influenced by declining market share or an entry into a new material jurisdiction;
EBITDA margins sustained below 15%.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
Increased confidence in the issuer's ability to manage operational volatility, minimizing its impact on earnings;
Successful execution of growth strategy resulting in the issuer scaling above $1 billion in EBITDA;
Publicly articulated financial framework or a demonstrated record of maintaining a consistent credit profile, yielding increased confidence in EBITDA leverage being sustained under 2.5x;
EBITDA margin sustained above 20%.
Liquidity and Debt Structure
As of June 30, 2026, on a pro forma basis for the proposed transaction, DraftKings would have approximately $1.3 billion in cash and an amended $750 million first-lien revolving credit facility due August 2031, which is expected to remain substantially undrawn. Fitch expects DraftKings' sizable cash balance, undrawn revolver capacity and positive FCF generation to continue to support a robust liquidity profile.
Pro forma for the transaction, total debt would increase to approximately $2.2 billion, including ~$1.2 billion of secured debt consisting of the existing term loan B and the new first-lien term loan B. DraftKings also would have approximately $965 million of remaining senior unsecured convertible notes due 2028 following the planned $300 million of opportunistic repurchases. Fitch expects the company to address the remaining 2028 convertible maturity through refinancing rather than repayment from cash on hand.
Issuer Profile
DraftKings is a prominent digital sports entertainment and gaming company. It offers online and retail sports betting, prediction markets, online casino and daily fantasy sports products, as well as digital lottery courier, media and other product offerings.
Date of Relevant Committee
06 March 2026
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS
Click here to access Fitch's latest quarterly Global Corporates Sector Forecasts Monitor data file which aggregates key data points used in our credit analysis. Fitch's macroeconomic forecasts, commodity price assumptions, default rate forecasts, sector key performance indicators and sector-level forecasts are among the data items included.
Climate Vulnerability Signals
The results of our Climate.VS screener did not indicate an elevated risk for DraftKings.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
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