Bank of America has downgraded its ratings on major sports betting platforms, DraftKings and Flutter, moving both to a “neutral” rating as a result of uncertainty around prediction markets. The bank said the downgrade comes as the industry faces different challenges, such as unstable betting margins and rising state taxes. Analyst Shaun Kelley from Bank
Bank of America has downgraded its ratings on major sports betting platforms, DraftKings and Flutter, moving both to a “neutral” rating as a result of uncertainty around prediction markets.
The bank said the downgrade comes as the industry faces different challenges, such as unstable betting margins and rising state taxes. Analyst Shaun Kelley from Bank of America explained that the “structural hold”, or profit margin from bets, is becoming less reliable. As a result, the bank is rethinking its expectations and lowering its profit assumptions.
Both DraftKings and Flutter are expected to face a tough environment ahead, with more competition, tighter rules, and higher costs likely to squeeze profits.
Over the past two years, DraftKings’ share of the U.S. online gaming market has decreased from 27% to 23%. Rising taxes and promotional spending are also being hit. As a result, the bank lowered its 2026 earnings estimate for DraftKings from $1.26 billion to $1 billion and dropped its price target from $40 to $35 per share.
Flutter, which owns FanDuel, is in a similar position. Although FanDuel’s business is more diversified, growth in betting volume has slowed to around 5% this year. So, Bank of America cut Flutter’s 2026 earnings forecast from $4.24 billion to $3.66 billion and reduced its price target from $325 to $250.
Bank of America also warns that potential new taxes in the UK and higher state taxes in the US could further hurt profits.