DraftKings Inc., Flutter Entertainment and other stocks tied to the US sports gambling industry fell sharply on Friday after fresh data pointed to rising competition from prediction market startups that are rapidly gaining traction during marquee sporting events.
Shares of DraftKings slid 8% in New York trading, marking their worst single-day drop since late September. Flutter, which operates the FanDuel app, declined 6.3% to its lowest closing level since August 2024. The broader sector also weakened, with an S&P index tracking gambling-related stocks falling 2.1%, reflecting growing investor concern about structural threats to the traditional sportsbook model.
The selloff followed a surge in activity on prediction market platforms such as Kalshi and Polymarket, which in recent months have introduced financial contracts tied to the outcomes of sports games. Those products saw particularly strong demand last week as the NFL playoffs began, a period that has historically been one of the most lucrative on the calendar for online sportsbooks.
At the same time, data released by New York state showed a sharp downturn in online sports betting revenue. For the week ending Jan. 11 — which included the NFL wild card weekend — revenue from traditional sportsbooks in the state dropped about 40% from a year earlier. That reversal stands out against a broader trend over recent months in which online gambling operators had generally posted year-on-year growth.
Prediction markets have become a growing source of pressure for sportsbooks because of how they are regulated. Unlike state-licensed betting apps, platforms such as Kalshi operate as federally regulated exchanges, allowing them to offer sports-related contracts nationwide, including in states where online sports gambling remains illegal. That regulatory distinction has enabled rapid expansion, even as several state gaming authorities have declared the products unlawful and sought to block them.
Despite those objections, trading tied to sports has surged. Sports contracts now account for roughly 90% of Kalshi’s total trading volume, according to industry estimates. The platform has also gained wider distribution through a partnership with Robinhood, exposing its offerings to millions of retail investors.
“We do believe prediction markets are having an impact on the sports betting companies,” said Jordan Bender, an equity research analyst at Citizens. “The PMs are built around large tentpole events like the NFL playoffs.”
Analysts at Piper Sandler said last week marked the five highest-volume games of the NFL season on Kalshi, with NFL-related contracts hitting a record $720 million in total trading. The firm noted that the Chicago Bears’ comeback win over the Green Bay Packers became the first single game on the platform to exceed $100 million in trading volume.
DraftKings and Flutter have attempted to respond by launching their own prediction market-style products in states where sports betting is prohibited. While those offerings debuted last month, analysts remain cautious about their near-term impact.
“It’s still early days for the products and Kalshi has a lot more functionality than them at this time, so I would be surprised if they were gaining a lot of traction,” said Needham analyst Bernie McTernan.
There is ongoing debate over whether prediction markets will meaningfully erode the core sportsbook business, particularly in high-margin segments such as multi-leg parlay bets. A recent report from Citizens Bank estimates that prediction markets still account for only about 5% of total sports wagering in the US.
“We think prediction markets will expand more than cannibalize traditional online sports betting markets,” said Dan Wasiolek, a senior equity analyst at Morningstar.
McTernan added that the latest stock declines reflect not only competitive fears but also difficult comparisons with unusually strong results last year. “If you look versus two years ago it doesn’t look as bad,” he said, suggesting volatility may persist as the industry adjusts to a shifting competitive landscape.
