Gambling Stocks Fall as NFL Predictions Gain on Sportsbooks

Core Insights - The sports gambling industry, particularly companies like DraftKings Inc. and Flutter Entertainment PLC, is facing significant challenges as new prediction market startups gain traction and attract users away from traditional sportsbooks [1][4]. Group 1: Market Performance - DraftKings shares fell by 8% in New York trading, marking the worst one-day decline since late September [3] - Flutter's shares, which operate the FanDuel app, decreased by 6.3%, reaching their lowest level since August 2024 [3] - The broader gambling sector also experienced a downturn, with an S&P index of industry shares dropping by 2.1% [3] Group 2: Competition from Prediction Markets - Startups like Kalshi and Polymarket have introduced financial contracts linked to sports game outcomes, leading to increased activity during the NFL playoff season [2] - New York state data indicated a decline in online sports wagering revenue compared to the previous year, despite this typically being a peak period for sportsbooks [2] - Prediction markets have gained prominence, with sports bets accounting for approximately 90% of trading volumes on Kalshi [5] Group 3: Regulatory Environment - Several state gaming regulators have deemed the prediction market products illegal and have urged companies to cease operations, yet the startups continue to thrive [5] - Kalshi's partnership with retail broker Robinhood has facilitated the wide distribution of these contracts [5] Group 4: Analyst Insights - Analysts from Citizens believe that prediction markets are impacting traditional sports betting companies, especially during major events like the NFL playoffs [6] - Piper Sandler & Co. reported that the previous week saw record NFL-related bets on Kalshi, totaling $720 million, with the Chicago Bears' game marking a significant milestone by exceeding $100 million in trading [6] Group 5: Company Responses - Both DraftKings and Flutter have recently launched their own prediction market offerings in states where sports gambling is illegal, although it remains uncertain if these new apps have gained traction [7]