Betting Stocks Fall as NFL Prediction Bets Gain on Gambling Apps

Stocks tied to the sports betting industry declined sharply on Friday as data showed growing traction for prediction market platforms. DraftKings Inc. fell as much as 8.3% in New York trading while Flutter Entertainment PLC dropped 5.5%. The decline comes as platforms like Kalshi and Polymarket report surging activity in NFL-related bets.

The shift is particularly notable during what is typically a high-demand period for sportsbooks. New York state data showed online sports wagering revenue plunged 40% year-over-year during the week ending Jan. 11, which included the NFL wild card weekend.

Prediction market contracts now account for a significant portion of trading volumes on these platforms. Kalshi's partnership with Robinhood has helped expand their reach, with NFL-related bets hitting a record $720 million in trading last week.

Why the Move Happened

The rise of prediction markets represents a new competitive challenge for traditional sportsbooks. These platforms operate as federally regulated exchanges, allowing them to offer sports wagers that bypass state-specific gambling laws.

Kalshi has established itself as a major player in this space, with the Chicago Bears-Packers game becoming its first to exceed $100 million in trading. This performance highlights the appeal of these alternative betting products.

Industry analysts are divided on the long-term implications. While some believe prediction markets will capture a meaningful share of the sports betting market, others argue the impact remains limited. One analyst noted these platforms currently account for just 5% of total sports wagers in the US.

How Markets Responded

Traditional sportsbook operators have responded by launching their own prediction market offerings. Both DraftKings and Flutter have entered the space in states where sports gambling is illegal, though it remains unclear if these efforts will gain traction. According to reports, these new offerings are still in early stages.

The recent decline in stock prices has raised questions about the effectiveness of these new offerings. Some analysts believe Kalshi maintains a significant functional advantage over these newer entrants.

Investor sentiment has been further influenced by recent earnings guidance from major operators. Macquarie analyst Chad Beynon noted that improved NFL hold rates in November and December could lead to stronger-than-expected fourth-quarter results for Flutter and DraftKings.

What Analysts Are Watching

Earnings reports will be closely watched as key indicators of the industry's health. DraftKings is scheduled to report results on Feb. 12 while Flutter will follow on Feb. 26. According to the schedule, these reports could provide insight into the market's trajectory.

Analysts at Wells Fargo recently upgraded their rating on DraftKings to Overweight while downgrading Flutter to Equalweight. This decision was based on expectations of stronger performance from DraftKings in the upcoming quarter.

The debate over prediction markets' impact continues among industry experts. While some believe these platforms could cannibalize traditional sports betting markets, others argue they will expand overall wagering activity. As analysis shows, the long-term effects remain uncertain.

Regulatory developments will also be crucial as state and federal authorities continue to evaluate these new betting products. Several state regulators have raised concerns about the legality of prediction market contracts.