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Prediction markets have stormed the sports betting arena, leading the biggest sports gambling companies to lose billions in value over recent weeks. Bank of America thinks the sell-off appears overdone. Analyst Shaun Kelley reiterated his buy ratings on sports betting giants DraftKings and FanDuel parent Flutter on Monday. While he lowered his price target on both stocks to “reflect overhangs” from prediction markets, his targets still point to big gains ahead. Kelley trimmed his DraftKings stock forecast by $2 to $48, which implies 37.2% upside from Monday’s close. His $325 price target on Flutter, down from $350, suggests the stock can jump about 26.8%. Shares of DraftKings and Flutter have plummeted roughly 27% and 19%, respectively, over the past month in part due to increasing competition from prediction market platforms such as Kalshi and Polymarket. The latter struck a major deal with Intercontinental Exchange on Tuesday, in which the New York Stock Exchange parent will invest $2 billion in Polymarket . Kalshi is considered the biggest threat to the two online sports betting operators, as the company is available in all 50 U.S. states and is capturing the attention of younger sports bettors. DKNG FLUT 1Y mountain Performance of DraftKings and Flutter over the past year. Fears about this competition resurfaced last week when Kalshi quietly rolled out same-game parlays on Sept. 29 for two Monday night NFL games, reflecting a push from the prediction market into the expansive industry of sports betting. Kelley noted that Kalshi’s parlay offering still falls short of the variety of parlay options given by traditional sports books. He added that sports prediction markets have $1.3 trillion in “‘available’ volume,” But the analyst defended the longer-term case for DraftKings and Flutter, noting OSBs could remain untouched from the competition. If the current regulatory gap remains between both industries, Kelley said he expects DraftKings and Flutter will enter the prediction market space — potentially beginning with some of the 21 states they do not operate in. “Investors in OSB are rightly concerned about competition from PMs, but the math shows there is substantial room for PMs to grow without having any impact on the existing public-company OSB landscape,” Kelley wrote. “Beyond state regulation, we believe there is a strong moat for existing OSB operators that have invested billions of dollars in 1) product, 2) technology, and 3) customer acquisition and retention,” he added. “These investments lessen cannibalization risk in their existing 29 states. In these markets, PMs offer an inferior product for core sports bettors, with a fraction of the markets, worse speed/latency and no bonusing/promotional reinvestment to keep bettors active. Better pricing for PMs is debatable.” To be sure, Kelley said that prediction markets have potentially better margins than OSBs. Kalshi operates under the Commodity Futures Trading Commission (CFTC), which allows it to function under different state regulations than most OSBs and gives it legal access even in some states where traditional sports betting is restricted. Moreover, Kalshi has seen rapid growth in sports-related betting in recent weeks. According to BofA, Kalshi since Sept. 1 has shown strong prediction market contract volume growth, with 80% of that growth driven by sports. “While we expect overhangs short term with risk ahead (resulting in lower multiples and POs), the battle, for a new and much larger market is just beginning,” Kelley said. ( Learn the best 2026 strategies from inside the NYSE with Josh Brown and others at CNBC PRO Live. Tickets and info here . )
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