Hot Picks: Prediction markets disrupt sports betting stocks

Gaming and gambling stocks are navigating a shifting landscape as prediction markets, sports betting data rights and regulatory uncertainty reshape investor sentiment. Analysts say sector fundamentals remain solid, even as valuation pressure persists amid questions about how new betting formats could affect traditional sportsbooks.

BNN Bloomberg spoke with Jordan Bender, director of gaming, online gaming and gaming technology research at Citizens, about his top ideas in gaming and gambling, including a sports betting data provider with deep ties to the NFL, a major online sportsbook operator and a diversified gaming company positioned for improved free cash flow.

Key Takeaways

• Sports betting data providers are increasingly viewed as infrastructure plays, supplying essential technology and data that power sportsbooks rather than competing for consumers.
• Investor concerns around prediction markets have pressured gaming valuations, though available data suggests limited cannibalization of traditional sports betting so far.
• NFL data rights remain a critical driver of revenue and strategic value for betting technology companies tied to professional sports leagues.
• Large online sportsbook operators may benefit from prediction markets by integrating new products rather than losing market share.
• Free cash flow inflection points, following years of heavy capital spending, are becoming a key catalyst for diversified gaming companies with brick-and-mortar assets.

Read the full transcript below:

ANDREW: Let’s get to some Hot Picks. This time, we’re looking at the gambling and gaming industry. Our guest has Genius Sports, a betting data specialist, as a top pick. We’re joined by Jordan Bender, director of gaming, online gaming and gaming technology research at Citizens. Thanks very much for joining us. It’s a hot area and an exploding industry. Tell us what Genius Sports does and why they caught your eye.

JORDAN: Yeah, it’s good to be here. Thank you. So Genius Sports is the picks-and-shovels of the industry. So the online sports betting and iGaming industry in the United States and up in Canada look extremely strong. Fundamentals look good. And this is the back end, what drives a lot of these sportsbooks.

So it’s a company that’s growing revenue 20 per cent-plus. It’s growing EBITDA at the bottom line. Margins are expanding. And we think this is kind of the formula and the setup in 2026. And investors are looking at this space and going, how do we play the sports betting industry? And we think this is the safest way.

The stock has pulled back here. There’s prediction market — a lot of prediction market talk within the industry — and the overhang. We think Genius has been unfairly valued because of this overhang. So on the pullback, we think this is — 2026 is going to be a beat-and-raise story.

So they put out 2028 targets back in September at their investor day. As we progress through the year and the company beats and raises, we think that’s what’s going to lead to share appreciation and have valuation go from about 11 times today up to our target around 17 times EBITDA.

ANDREW: And what do you — sorry, Jordan — you refer to an overhang there. Can you just clarify that?

JORDAN: Yeah, there’s just, you know, a thought out there that prediction markets are going to cannibalize the legal online sports betting industry, and a company like Genius wouldn’t be needed in that case.

ANDREW: That’s amazing. So the prediction markets are — they’re shouldering their way into the sports betting market?

JORDAN: Yeah. And they’re going through a different type of framework in the U.S., which is how they’ve kind of exploded over the last year. And essentially, you know, because it’s not truly traditional sports betting, if the industry starts to move towards prediction markets, you won’t need a company like Genius, or that’s at least what the bears in the industry are talking about as of today.

We think that’s overblown. We think it’s not true. And what the data is telling us is that the cannibalization impact is not anywhere close to how these stocks should be trading.

ANDREW: That’s interesting. And I think you touched on this, but the NFL relationship you think is extremely valuable for Genius.

JORDAN: Yeah. And, you know, really what investors come to us talking about is, how is Genius integrated into the NFL? And this is what will essentially make or break this company.

They have the rights to the NFL to sell that data to the sportsbooks. So, you know, they have the sports betting component and they have the media integration component, so they’re helping advertisers advertise across the NFL. And with that, the NFL is a growing sport in the U.S. It is dominant. And we think it’s a derivative play off of the health of the NFL here.

ANDREW: Let’s move on to DraftKings, another massive player in sports betting, and they have a partnership with ESPN.

JORDAN: Yeah. So Genius is the back-end part of the ecosystem. DraftKings is the front end, the B2C company. So DraftKings, in our view, you know, as it sits here today, it looks like they’re starting to gain share.

They are the first — you know, given the day — the first or the second largest sports betting company in the United States and Canada. You know, from their position, because, you know, we think they have the partnership with ESPN that started Dec. 1.

We think they’re starting to take some share that leads into the first quarter with easy comps, and then into the middle part of the year, which is a sports calendar that’s less volatile now that we exit the NFL.

So from a setup perspective, we like DraftKings here with the valuation where it’s trading. Again, it’s been caught up in the prediction market overhang. For them, it actually should be a benefit. They launched their own platform, and we think they’re going to — ultimately, it’s going to be a net, net positive.

ANDREW: That’s really interesting. So Kalshi would be one of the big prediction markets. Are they — who regulates them anyway? Is it a bit of a grey area?

JORDAN: As of today, it’s technically legal. They operate through the federal level. In the CFTC now, there’s this huge ongoing debate of how legal is it for them to offer sports contracts. That’s why they’ve exploded.

They’ve kind of figured out a way to get into all 50 states across the United States and offer a sports betting-type product. Ultimately, it’s going to bounce through the courts and ultimately end up in the Supreme Court. And that’s the ultimate decision-maker right there.

ANDREW: And then your final idea here is Churchill Downs. Are we — we’re talking about much more than racetracks here, though?

JORDAN: Yeah. You know, everyone might know Churchill Downs for the Kentucky Derby in May, but, you know, as of today, that only sits about 15 per cent of their earnings.

And in recent years, they’ve invested a lot of money into the other part of the business. So they have casino-type offerings. And, you know, the setup for the stock is, it’s traded flat for the last five years, but they’ve gone through a massive capex cycle, M&A cycle.

And as we sit here, that’ll start to pull back for the first time in a long time. As capex falls, we think this company is going to start producing a lot of free cash flow, and that’s going to help the balance sheet of the company.

And if we think that’s what investors are going to want here from a bellwether — a very clean company within the gaming space.

ANDREW: And just tell us — what else are they doing? They’re involved in electronic roulette. How does that work? Are these machines, or is it online roulette?

JORDAN: Yeah. So about half of their business is actually traditional brick-and-mortar casinos. So like you would see in regional markets or in Las Vegas.

There’s another piece of it that they offer — gaming in a slot machine that has different back-end economics. You know, we like to just tell people it’s casinos. So, you know, the vast majority of their business actually sits within brick-and-mortar tables and slot machines.

ANDREW: Thanks very much, Jordan. And really, what a landscape. We’re tight for time, but I mean, the explosion of online gaming in recent years, and the willingness of sports leagues to actually embrace gambling.

JORDAN: It’s a wild industry. And it’s always — it’s something new every day.

ANDREW: Jordan, thanks very much indeed. Really appreciate it. I hope you can come back soon. Jordan Bender has been our guest there. And yeah, it really is incredible how governments have, over the past decade or so, just loosened the control on gambling.

---

This BNN Bloomberg summary and transcript of the Jan. 22, 2026 interview with Jordan Bender are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.