Stock prices of major US sports betting companies plunged in mid-January. New data indicated increased competition from prediction market platforms during the busiest weeks of the NFL season.
Traditional Sportsbooks Stumble as Kalshi, Polymarket Gain Ground
DraftKings and Flutter Entertainment, owner of FanDuel, experienced share declines. Investors responded to signs that traditional sportsbooks might be losing momentum during peak betting periods. DraftKings’ stock temporarily dropped over 8%, while Flutter’s fell more than 5%, according to Fortune. This also affected other gambling stocks.
The market reacted to a mix of company performance and shifting consumer habits. In New York, the largest legal sports betting market in the US, weekly figures showed a significant drop in online sportsbook revenue during the NFL Wild Card weekend compared to the previous year. Earnings from gambling in the week ending January 11 were about 40% lower than the same time last year, despite the playoffs attracting many bets.
Meanwhile, Kalshi and Polymarket experienced record interest linked to major NFL games. These platforms offer financial contracts based on sports outcomes and operate under federal commodities regulations rather than state gambling laws. NFL-related contracts on Kalshi reached new trading volume highs during the early playoff rounds, with some games showing unprecedented activity, as estimated by analysts.
Download Data Signals Shift From Sportsbooks to Prediction Markets
This disparity in outcomes has fueled further debate on Wall Street about whether prediction markets are evolving from a niche product to a viable alternative to sportsbook betting for major sporting events. Analysts note that these platforms have gained extensive access through brokerage apps and a product design that resembles betting while circumventing many state-level restrictions.
Data downloads during the playoff period offer a clearer perspective. While most leading sportsbook apps saw fewer new user installs year-over-year during the Divisional Round, Kalshi had its best user sign-up run, achieving about one million downloads over the playoffs. Experts monitoring this area believe prediction markets might now draw approximately 5% of all sports betting activity.
Sportsbook companies attribute some of the challenges to tougher comparisons and a more cautious promotional approach. Some firms have reduced marketing efforts to prioritize profitability, offering fewer significant promotions that previously attracted new users during the NFL season. DraftKings was the only major player to experience a slight increase in downloads during this period.
Legal questions remain significant. State gaming boards have questioned whether sports prediction contracts violate the law, while platforms argue their products comply with regulations. This unresolved issue makes investors cautious.
- SCCG Management. The Gambling Industry’s Global Connector. Access Here.
- Source: SCCGManagement.com