- DraftKings dropped 8% on Wednesday, while Flutter declined 4%.
- The rise of prediction market platforms such as Polymarket and Kalshi, along with regulatory updates surrounding them, impacts sports betting stocks.
- Stocktwits sentiment for DKNG has dropped to ‘extremely bearish.’
DraftKings and Flutter Entertainment shares slid to multi-year lows on Wednesday as investors reacted to regulatory updates for the prediction markets space, a growing challenger to sportsbook operators, and a new lawsuit over the addictive nature of gambling platforms.
DraftKings dropped 8.1% to its lowest level in nearly three years, while Flutter slid 4.1% to its lowest level since August 2022.
Prediction Market Regulations Weigh On DKNG, FLUT Trades
The rise of prediction market platforms, such as Polymarket and Kalshi, has weighed on DraftKings’ and Flutter's stocks, with investors increasingly viewing the emerging segment as a competitive threat to sports betting.
More recently, however, both platforms have come under scrutiny over certain contract offerings, alongside a wave of regulatory proposals – factors that have, in turn, added complexity to trading in DraftKings and Flutter.
On Monday, Senators John Curtis of Utah and Adam Schiff of California introduced a bipartisan bill that would bar CFTC-regulated platforms, including Kalshi and Polymarket, from listing contracts tied to sporting events. The event lifted DraftKings and Flutter on that day.
In total, three bills targeting prediction markets have been introduced in the U.S. Congress this month. However, TD Cowen analyst Jaret Seiberg has issued a note stating that none of them are likely to become law in the current legislative session.
He said there is no viable path for any of them to pass this Congress, and that President Donald Trump would likely veto any bill that did advance, given his administration's support for prediction markets.
Lawsuits Overhang
Separately, DraftKings and Flutter unit FanDuel were sued in a product liability case alleging that the companies used modern technology to encourage addictive microbetting, the Public Health Advocacy Institute said Tuesday.
DraftKings, on its part, is contending with another legal issue: The National Collegiate Athletic Association on Friday sued the company over its marketing of online gambling on the famed U.S. college basketball tournament known as "March Madness," citing risks to NCAA athletes and the group's reputation.
That lawsuit seeks to bar DraftKings from using trademarked phrases for the tournament, including "March Madness," "Final Four," "Elite Eight," and "Sweet Sixteen."
Retail’s View On DKNG, FLUT
On Stocktwits, DraftKings was among the top trending tickers late Wednesday. Retail sentiment dropped to ‘extremely bearish’ from ‘neutral’ the previous day, as traders debated the regulatory overhangs, news, and the stock’s sharp drop. The sentiment for FLUT remained ‘bearish.’
“Two bad news. Public Health files lawsuit against Draftkings, Fanduel. Congress won’t pass prediction market bill. When will bleeding stop?” remarked a user.
“So this stock first plummets because prediction platforms are stealing their market share which is laughable, then it plummets more because prediction markets may be deemed illegal, hopefully this is all a scheme for big institutions to load up, but makes one question the stock market as a whole,” said a user.
Some were even loading up on the fresh weakness: “$DKNG close to support levels, grabbing a bunch... A gamble on a gamble app!” remarked a user.
Year to date, DKNG stock is down nearly 38%, and FLUT is down 52%.
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