Gambling Stocks Sag as Prediction Markets Steal Super Bowl Bets

Industry Overview - The Super Bowl, typically a peak event for gambling companies, is facing challenges this year, with Flutter Entertainment's stock experiencing an eight-week decline, the longest in 23 years, and DraftKings trading at its lowest levels since 2023, down over 60% from its all-time high five years ago [1][2] Market Dynamics - The matchup between Seattle and New England lacks the celebrity appeal of previous years, contributing to a decline in traditional sports betting [2] - The rise of prediction markets, such as Kalshi, is a significant concern for the industry, as they provide an alternative betting method that circumvents state-level gambling regulations [2][5] Trading Volume Insights - Jordan Bender, a senior equity analyst, anticipates record trading volumes on prediction markets during the Super Bowl weekend, while legal wagering on traditional sportsbooks is expected to decrease by 2% compared to last year [3] - The decline in Super Bowl handle is attributed to the competition from prediction markets, which are gaining traction [3] Historical Context - The gambling industry had been experiencing growth since the Supreme Court's 2018 decision allowing states to legalize sports betting, with Super Bowl wagers increasing for eight consecutive years [4] Emergence of Prediction Markets - Kalshi, a leading US prediction market startup, initially focused on niche financial contracts but shifted to sports betting after the Commodity Futures Trading Commission (CFTC) did not intervene when they began offering Super Bowl wagers in early 2025 [5][6] - Sports betting now constitutes over 90% of Kalshi's trading volume, indicating a significant shift in the market landscape [6]