DraftKings Plummets 5.2% Amid Regulatory Fears and Prediction Market Surge – What’s Next?

Summary
• DraftKings (DKNG) tumbles 5.24% intraday to $33.355, its lowest since September 2024.
• Kalshi’s $275M weekend trading volume and Ohio’s potential prop-bet ban spark sector-wide jitters.
• Options activity surges, with 2579 contracts traded on the DKNG20251017C35 put.
• Caesars (CZR) also declines 3.8%, signaling broader gambling sector pressure.

Today’s selloff in DraftKings reflects a perfect storm of regulatory uncertainty and emerging competition. With Kalshi’s explosive growth and state-level scrutiny on prop bets, investors are reevaluating the long-term viability of sports betting platforms. The stock’s 5.2% drop—its largest in over a year—has triggered a wave of options trading and forced analysts to reassess risk-reward profiles.

Prediction Market Competition and Regulatory Scrutiny Trigger DKNG Selloff
DraftKings’ sharp decline stems from two converging threats: Kalshi’s record-breaking $275M in weekend trading volume and Ohio’s potential ban on prop bets. Kalshi’s platform, which offers better odds on parlays (e.g., $1,043 vs. DraftKings’ $850), is eroding market share. Meanwhile, Ohio’s governor has called for an outright ban on prop bets, which critics argue enable athlete manipulation and online harassment. These developments have amplified existing regulatory headwinds, with 15 states already restricting collegiate prop bets. The stock’s 5.2% drop mirrors its 3.6% decline 18 days ago over similar concerns, signaling a deepening crisis of confidence.

Gambling Sector Under Pressure as Caesars Slides 3.8%
The broader gambling sector is under pressure, with Caesars (CZR) down 3.8% alongside DraftKings. While DraftKings faces unique challenges from prediction markets and prop-bet regulations, Caesars’ decline reflects broader macroeconomic concerns, including rising interest rates and shifting consumer spending. The sector’s 52-week low for DraftKings ($29.64) and Caesars’ recent struggles highlight a shared vulnerability to regulatory and competitive pressures. However, DraftKings’ exposure to prediction markets and state-level legislation makes its near-term outlook more precarious.

Bearish Options and ETFs: Navigating DKNG’s Volatility
• 200-day average: 40.18 (below current price)
• RSI: 21.53 (oversold)
• MACD: -2.87 (bearish divergence)
• Bollinger Bands: Lower band at 31.54 (critical support)

Technical indicators confirm a short-term bearish bias, with DKNG trading near its 52-week low. The stock is below its 200-day moving average and RSI at 21.53 suggests oversold conditions, but momentum remains weak. Key support levels at $31.50 (lower Bollinger band) and $29.64 (52-week low) are critical for near-term direction. While the sector leader Caesars (CZR) offers limited ETF exposure, options remain the primary vehicle for positioning.

Top Options Picks:
• DKNG20251017P32 (Put):
- Strike: $32, Expiry: 2025-10-17
- IV: 51.56% (moderate)
- Leverage: 70.83% (high)
- Delta: -0.285 (moderate sensitivity)
- Theta: -0.00238 (low decay)
- Gamma: 0.1336 (high sensitivity to price moves)
- Turnover: 68,099 (liquid)
- Why: High leverage and gamma make this put ideal for a 5% downside scenario (targeting $31.687).

• DKNG20251017P32.5 (Put):
- Strike: $32.5, Expiry: 2025-10-17
- IV: 53.53% (moderate)
- Leverage: 22.19% (moderate)
- Delta: -0.224 (moderate sensitivity)
- Theta: -0.008235 (low decay)
- Gamma: 0.115 (high sensitivity)
- Turnover: 36,778 (liquid)
- Why: Balances leverage and liquidity for a bearish play, with a 5% downside payoff of $0.817.

Action: Aggressive shorts should prioritize DKNG20251017P32 for maximum leverage. If $31.50 breaks, consider rolling into the DKNG20251024P31.5 put for extended exposure.

Backtest DraftKings Stock Performance
Below is an interactive report that summarises the event-study back-test of DraftKings (DKNG.O) after every trading day on which the share price fell by ≥ 5 % from the previous close between 1 Jan 2022 and 10 Oct 2025. (jump to the right-hand panel to explore the full result set and charts)Key take-aways1. Sample size: 63 events.2. Post-event drift: • The strongest positive excess return appears between day 5 and day 17; cumulative out-performance peaks around +7 ½ % on day 16, with an impressive >60 % win-rate over that window. • Beyond day 18 the edge decays and is no longer statistically significant by day 20. 3. Mean-reversion character: The data suggest that DKNG tends to bounce after severe daily declines, but the effect is short-to-medium term (approximately 1–3 trading weeks). 4. Risk note: Although the win-rate is favourable, individual events remain volatile and max drawdowns during recovery phases were not analysed in this quick event study.Assumptions & automatic choices• “Intraday plunge” data were approximated by daily close-to-close returns because intraday high/low data were not requested; this is usually a fair proxy when intraday lows coincide with closing weakness, but results may differ if you need true intraday extremes. • A 30-day post-event window was selected as the default horizon. • Price series are close prices (unadjusted for corporate actions; DKNG had no splits or large cash distributions during the test period). Feel free to:• Drill down into individual events in the module to inspect specific dates. • Re-run the test with intraday (high/low) data or a different drop threshold if higher precision is required.

DKNG Faces Critical Support at $31.50 – Aggressive Shorts Target $30.50
DraftKings’ 5.2% drop has exposed its vulnerability to regulatory and competitive pressures. With Kalshi’s rise and Ohio’s potential prop-bet ban, the stock’s near-term trajectory hinges on breaking below $31.50 (lower Bollinger band) or holding above $32.50 (200-day average). The sector leader Caesars (CZR) is down 3.8%, underscoring broader industry risks. Investors should monitor options volume and regulatory developments in Ohio. For those willing to take directional bets, the DKNG20251017P32 put offers a high-leverage play on a potential $30.50 target. Watch for a breakdown below $31.50 to confirm bearish momentum.