DraftKings Inc.DKNG
DraftKings Inc. Fair Value Disclosure
Fair Value Measurements
Certain assets and liabilities are carried at fair value under U.S. GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value and nonrecurring fair value measurements are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
•Level 1 — Quoted prices in active markets for identical assets or liabilities.
•Level 2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.
•Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.
The following tables set forth the fair value of the Company’s financial assets and liabilities measured at fair value as of December 31, 2025 and 2024 based on the three-tier fair value hierarchy:
December 31, 2025 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Money market funds | $ | 184,212 | $ | — | $ | — | $ | 184,212 | |||||||||||||||
| Derivative instruments | $ | — | $ | — | $ | 7,059 | (2) | $ | 7,059 | ||||||||||||||
| Equity securities | — | 9,127 | (1) | — | 9,127 | ||||||||||||||||||
| Total | $ | 184,212 | $ | 9,127 | $ | 7,059 | $ | 200,398 | |||||||||||||||
| Liabilities | |||||||||||||||||||||||
| Other current liabilities | $ | — | $ | — | $ | 14,900 | (4) | $ | 14,900 | ||||||||||||||
| Warrant liabilities | — | — | — | — | |||||||||||||||||||
| Other long-term liabilities | — | — | 59,534 | (4) | 59,534 | ||||||||||||||||||
| Total | $ | — | $ | — | $ | 74,434 | $ | 74,434 | |||||||||||||||
December 31, 2024 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Other non-current assets: | |||||||||||||||||||||||
| Derivative instruments | — | — | 7,059 | (2) | 7,059 | ||||||||||||||||||
| Equity securities | — | 13,533 | (1) | — | 13,533 | ||||||||||||||||||
| Total | $ | — | $ | 13,533 | $ | 7,059 | $ | 20,592 | |||||||||||||||
| Liabilities | |||||||||||||||||||||||
| Other current liabilities | 3,300 | (4) | 3,300 | ||||||||||||||||||||
| Warrant liabilities | $ | — | $ | 22,033 | (3) | $ | — | $ | 22,033 | ||||||||||||||
| Other long-term liabilities | — | 74,665 | (4) | 74,665 | |||||||||||||||||||
| Total | $ | — | $ | 22,033 | $ | 77,965 | $ | 99,998 | |||||||||||||||
(1)Represents the Company’s non-marketable equity securities, which are classified as Level 2 because the Company measures these assets to fair value using observable inputs for similar investments of the same issuer. The Company has elected the remeasurement alternative for these assets.
(2)Represents the Company’s derivative instruments held in other public and privately held entities. The Company measures these derivative instruments to fair value using option pricing models and, accordingly, classifies these assets as Level 3. There were no new Level 3 derivative instruments purchased by or issued to the Company for the years ended December 31, 2025 and 2024. The key inputs to the valuations are underlying stock price, volatility and risk free rate. A change in these significant unobservable inputs might result in a significantly higher or lower fair value measurement at the reporting date. Changes to fair value of these instruments are recorded in Other gain (loss), net on the consolidated statements of operations and (Gain) loss on marketable equity securities and other financial assets, net in the consolidated statement of cash flows.
(3)The Company measures its Private Warrants and the GNOG Private Warrants to fair value using a binomial lattice model or a Black-Scholes model, where appropriate, with the significant assumptions being observable inputs and, accordingly, classifies these liabilities as Level 2. Key assumptions used in the valuation of the Private Warrants and GNOG Private Warrants include term, risk free rate and volatility. See “Note 7 – Current and Long-term Liabilities” and “Note 14 – Earnings (Loss) Per Share” for further information on the Company’s warrant liabilities.
(4)Represents the contingent consideration issuable to former SIQ, Dijon, Simplebet and Railbird securityholders in connection with the acquisitions of SIQ, acquisition of Dijon, Simplebet Transaction and Railbird Transaction, respectively, upon the achievement of certain performance targets. The fair value of contingent consideration was generally calculated using customary valuation models based on probability-weighted outcomes of meeting certain future performance targets and forecasted results. The Company classified the contingent consideration liabilities as a Level 3 fair
value measurement due to the lack of observable inputs used in the model. The key inputs to the valuations are the projections of future financial results in relation to the business, revenue risk premium, revenue volatility, and operational leverage ratio as well as management judgment regarding the probability of achieving a future performance target. The table below includes a range and an average weighted by relative fair value of the significant unobservable inputs used to measure contingent consideration at fair value. A change in these significant unobservable inputs might result in a significantly higher or lower fair value measurement at the reporting date. Changes to fair value of these instruments are recorded in Other gain (loss), net on the consolidated statements of operations.
| December 31, 2025 | December 31, 2024 | |||||||
| Significant Unobservable Input of Level 3 Investments | Range (Weighted Average) | Range (Weighted Average) | ||||||
| Revenue volatility | 10.6% - 17.3% (15.3%) | 17.3% - 17.7% (17.6%) | ||||||
| Equity volatility | 45.0% - 54.2% (51.0%) | 53.4% - 60.0% (55.3%) | ||||||
| Operational leverage ratio | 61.0% - 75.0% (65.4%) | 65.0% - 70.0% (66.4%) | ||||||
The following table provides a roll forward of the recurring Level 3 fair value liability measurements:
| Balance at December 31, 2023 | $ | — | |||
| Contingent consideration issued for acquisitions | 77,965 | ||||
| Balance at December 31, 2024 | $ | 77,965 | |||
| Contingent consideration issued for acquisitions | 37,818 | ||||
| Payment of contingent consideration liabilities | (3,300) | ||||
| Fair value adjustment to contingent consideration liabilities | (38,049) | ||||
| Balance at December 31, 2025 | $ | 74,434 | |||
During 2025, the Company did not record any unrealized gains or losses for its Level 3 financial assets. The Company recorded an unrealized loss of $12.9 million in the aggregate for its Level 3 financial assets during 2024 and did not record any unrealized gains or losses for its Level 3 financial assets during 2023.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 13, 2026 | Showing above |
| 2024 | Feb 14, 2025 | |
| 2023 | Feb 16, 2024 | |
| 2022 | Feb 17, 2023 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.