Betting stocks fall as NFL prediction bets gain on gambling apps

Core Viewpoint - Stocks linked to the sports gambling industry, including DraftKings and Flutter Entertainment, are experiencing significant declines due to competition from prediction market startups like Kalshi and Polymarket, which are gaining traction during the NFL playoff season [1][2]. Group 1: Market Performance - DraftKings shares fell by as much as 8.3%, marking the worst intraday drop since late October, while Flutter's shares dropped by 5.5%, reaching the lowest level since late November [3]. - The broader gambling sector also faced declines, with an S&P gauge of the industry's shares decreasing by 2.5% [3]. - New York state data indicated a 40% year-over-year drop in revenues from traditional sportsbooks for the week ending January 11, coinciding with the NFL wild card weekend [11]. Group 2: Competition from Prediction Markets - Prediction market platforms like Kalshi and Polymarket have reported increased activity, particularly during the NFL playoffs, with Kalshi's NFL-related bets reaching a record $720 million [6]. - Prediction markets are estimated to account for approximately 5% of total sports wagers in the U.S., indicating they are still a small player compared to traditional sportsbooks [9]. - Despite regulatory challenges, prediction markets have gained significant trading volumes, with sports bets making up around 90% of Kalshi's trading activity [5]. Group 3: Industry Response - DraftKings and Flutter have recently launched their own prediction market offerings in states where sports gambling is illegal, although it remains unclear if these new products have gained traction [7]. - Analysts suggest that while prediction markets may not yet be significantly impacting traditional sportsbooks, they are expected to expand rather than cannibalize existing markets [10]. - The industry is debating the potential of prediction markets to compete with established sportsbooks, especially in profitable segments like multi-leg parlay bets [9].