Last updated: March 28, 2024
Despite an overall uptrend in gaming stocks, DraftKings and Flutter saw declines amid fears of increased regulatory scrutiny and a proposed NCAA prop bet ban. Senator Blumenthal expressed concerns over operator strategies, advocating for responsible gambling measures. Analysts suggest the market may have overreacted, with Craig-Hallum seeing buying potential and Jefferies highlighting Flutter’s resilience.
Amid a general uptrend in gaming stocks, DraftKings (NASDAQ: On the US Stock Exchange, DKNG (Draft Kings) and FLUT (Flutter Entertainment) shares went down on Wednesday, with the decline caused by worries about the potential of additional watchdog and obstacles on the part of the sports betting operators in the US. From the late trading spike resulting from NCAA President Charlie Baker’s suggestion to prohibit prop betting on college games, both stocks had big drops averaging 6% or more. Such drops were not the only reason for the decrease.
According to Baker, one shred of evidence is the NCAA’s promise of safeguarding the players from potential play hazards and also the protection of the general principles of sports. These are some of the reasons the particular action is necessary as indicated by the recent events that have made some headlines. The allusion in question might just refer to the ongoing “investigation into anomalous betting models, related to props aimed at Toronto Raptors’ player Jontay Porter”.
Props, which are proposition bets on specific events or outcomes, have gained great popularity among sports gamblers. The betting sites Flutter and DraftKings also provide this type of bet for their users. People looking for different sports betting options apart from sides or totals often turn to prop bets, which frequently form part of the same-game parlay, a newly favoured product for gaming companies as it opens up new revenue channels.
Such reports of federal regulators’ stepped-up supervision of online sportsbook operators sent DraftKings and Flutters’ shares on a downward trend. Senator Richard Blumenthal of Connecticut outlined serious concerns relating to strategies used in gaming by operators to motivate onslaughts of wagers from gamblers who lost often and in large amounts.
In an open letter by Senator Blumenthal to the heads of internet sports betting operators that includes draft Kings and fan duty, he emphasised that these companies need to act responsibly over profit. He advocated that operators make an effort to squeeze every piece of collected data to discover the playing habits of problem gamblers and then provide proactive assistance like self-exclusion options and treatment services.
Additionally, Senator Blumenthal insisted on the banning of marketing strategies aimed at high-risk bettors with disposable money looking for freebies and perks. Moreover, he argued that these vulnerable individuals should be protected from harm instead of promoting exploitation.
While DraftKings and Flutter shares experienced setbacks due to the Blumenthal letter and NCAA news on Wednesday, some analysts argue that the market reaction was premature. Research firm Craig-Hallum suggests that the decline in stock prices presents a potential buying opportunity, labelling it as an “overreaction.”
The firm supports the idea of banning NCAA prop bets, believing it would enhance wagering integrity. Craig-Hallum notes that such bets likely constitute only a small percentage of total wagers on college games and predicts that bettors would redirect their funds to other types of bets if the ban were implemented.
Jefferies, meanwhile, acknowledges the unfortunate timing of the Blumenthal letter and Baker’s proposal to halt prop bets. However, they believe that Flutter is better positioned to address challenges such as increased taxes, scrutiny of VIP schemes, and potential bans on college betting.
Marilyn Chavez is an associate researcher at the Missouri University of Science and Technology, where she studied the mathematical probabilities and aspects of casino games like slot machines. She’s written several case studies which have been published by multiple problem-gaming institutions to help spread awareness about the dangers of online gambling and gambling addiction. She also presented a 2019 Ted talk on the topic of gambling among minors.
