Betting Shares Decline While NFL Prediction Wagers Rise on Gambling Platforms

Sports Betting Stocks Slide Amid Rise of Prediction Markets

Photographer: Jason Bergman/Bloomberg

Shares of companies such as DraftKings Inc. and Flutter Entertainment PLC, along with other sports betting stocks, experienced significant declines on Friday. This drop followed reports indicating that new prediction market startups are gaining traction and potentially drawing users away from traditional sportsbooks.

Emerging platforms like Kalshi and Polymarket, which now offer financial contracts based on sports outcomes, saw a surge in user activity at the start of the NFL playoffs. In contrast, New York state data revealed that online sports betting revenues fell sharply compared to the same period last year—a time typically marked by increased betting activity.

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DraftKings' stock plummeted by as much as 8.3% in New York, marking its steepest single-day loss since October. Flutter, the parent company of FanDuel, saw its shares fall by up to 5.5%, reaching their lowest point since November. The entire gambling sector was affected, with an S&P index tracking the industry dropping as much as 2.5%.

For several months, online sportsbooks have faced mounting competition from prediction markets, which have leveraged their federal regulatory status to offer sports-related contracts that bypass state-level gambling restrictions.

Despite some state regulators labeling these new products as illegal and urging their removal, the startups have continued to expand. Sports contracts now represent about 90% of trading activity on Kalshi, boosted by a partnership with Robinhood that has broadened their reach.

"Prediction markets are definitely impacting traditional sports betting companies," said Jordan Bender, an equity research analyst at Citizens. "These platforms are designed around major events like the NFL playoffs."

Analysts at Piper Sandler & Co., led by Patrick Moley, reported that last week featured the five highest-volume games of the season on Kalshi, with NFL bets totaling a record $720 million. Notably, the Chicago Bears' comeback against the Green Bay Packers became the first game on Kalshi to surpass $100 million in trades.

In response, both Flutter and DraftKings have recently launched their own prediction market products in states where sports betting remains illegal. Although these new apps debuted last month, it remains uncertain whether they have attracted significant user interest.

Industry Perspectives and Future Outlook

According to Needham analyst Bernie McTernan, "It's still early for these new offerings, and Kalshi currently provides more features, so it's unlikely they've gained much momentum yet."

The industry continues to debate whether prediction markets can truly rival established sportsbooks, especially in lucrative segments like multi-leg parlays. A recent Citizens Bank report estimates that these new platforms still represent just 5% of all sports wagers in the United States.

"We expect prediction markets to grow without significantly eating into the traditional online sports betting market," said Dan Wasiolek, senior equity analyst at Morningstar.

Despite the recent downturn, New York state data shows that online gambling companies have generally increased their revenues year-over-year. However, the latest weekly figures indicate that sportsbook revenues in New York fell by 40% compared to the same week last year, which included the NFL wild card round. This decline coincides with the rising popularity and trading volumes of prediction markets.

McTernan from Needham notes that while the stock selloff is largely driven by the New York data, sportsbooks are also facing tougher year-over-year comparisons. "If you compare the numbers to two years ago, the situation doesn't look as severe," he added.

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