Chavdar Vasilev is a journalist covering the casino and sports betting market sectors for CasinoBeats. He joined CasinoBeats in May 2025 and reports on industry-shaping stories across the US and beyond, including legislative debates, market...
Read Full BioDraftKings and Flutter Entertainment shares fell sharply on Tuesday, Nov. 4, after Bank of America (BoA) downgraded both from Buy to Neutral, warning of mounting risks to the industry’s structural margins and long-term growth narrative.
The downgrade, led by BoA analyst Shaun Kelley, sent DraftKings (DKNG) shares down 6.4% at close on Tuesday to their lowest level in more than two years. Flutter Entertainment (FLUT), parent of FanDuel, slipped 3.9%. Both further slipped slightly at the market’s open on Wednesday.
Structural Hold & Tax Headwinds
BoA’s report pointed to renewed doubts about the sector’s “structural hold.” That’s the percentage of wagers sportsbooks retain as revenue after paying winners. Kelley wrote, “We are now taking a harder look at the model and baking in lower hold amid the volatility.”
Recent sports outcomes have also contributed to slimmer margins. Favorable outcomes have led to bettors winning more often, thereby cutting into operator margins. Even with rising handle and continued customer growth, those swings highlight the industry’s dependence on favorable outcomes and stable margins.
BoA additionally flagged persistent tax and regulatory headwinds. Illinois raised taxes for sportsbooks earlier this year, and several other states are considering doing the same. Meanwhile, the UK continues to tighten oversight on prominent operators, including Flutter.
Kelley described these pressures as “relentless headwinds” for sustainable profit growth.
As a result, BoA reduced its price targets for DraftKings to $35 from approximately $48. For Flutter, it lowered the target to $250 from around $325. Kelley said both companies remain well-positioned operationally. However, they are entering a more challenging environment where margin management and tax exposure will dominate the outlook.
The downgrade underscores how quickly Wall Street’s optimism toward sports betting can shift as margins tighten and competition evolves.
Expanding Prediction-Market Pressure
The note also identified the rapid expansion of prediction markets and sports event contracts, in particular, as a new structural risk for traditional sportsbooks.
According to Kelley, such exchanges could “divert betting volume” by offering lower fees, dynamic pricing, and a perception of better transparency.
“Worst case, states could actually try to offset [prediction market] cannibalization by raising taxes on incumbents,” he warned.
The past month has underscored that risk. Kalshi’s funding and expansion announcement sparked an immediate drop in DraftKings and Flutter shares. That reflected investor concerns that align with the BoA note.
Kalshi, together with Polymarket, also announced a high-profile partnership with the NHL. Polymarket, which is expecting to return to the US within weeks, also received a financial boost from ICE, the parent company of the New York Stock Exchange. ICE’s involvement signals confidence that prediction markets are moving closer to the mainstream
Furthermore, in one of the latest developments in the sector, President Trump’s social media platform, Truth Social, announced a partnership with Crypto.com to launch “Truth Predict.”
Together, these developments illustrate why BoA now views prediction markets as a credible competitive overhang—not just a niche experiment.
Still, DraftKings and Flutter are monitoring the segment and preparing for eventual entry. In August, FanDuel announced a deal with CME Group to launch prediction markets by the end of the year. Meanwhile, at the end of October, DraftKings announced the acquisition of Railbird Technologies and its CFTC-designated exchange arm.
While neither operator included sports event contracts in their announced product plans, their rise in popularity will likely force them to do so.
With prediction markets gaining legitimacy, operators like DraftKings and Flutter may soon find themselves competing not just on odds—but on the definition of what constitutes a bet.
