Gaming and gambling stocks are seeing heightened volatility as prediction markets expand into sports-related contracts, raising concerns around regulation, engagement trends and near-term margins. Analysts say recent share price weakness across the sector may offer longer-term opportunities for investors willing to tolerate short-term uncertainty.
BNN Bloomberg spoke with Jason Tilchen, senior research analyst, digital gaming and entertainment, at Canaccord Genuity, about how prediction markets are affecting sports betting operators, why sentiment has weakened and where he sees value across betting platforms and gaming data providers.
Key Takeaways
- Prediction markets tied to sports events are creating regulatory and legal uncertainty that could take years to resolve.
- Increased investment in prediction platforms is pressuring near-term margins and contributing to weaker sentiment toward betting stocks.
- Engagement trends across regulated sports betting platforms have slowed, raising concerns about possible market cannibalization.
- Global operators with diversified revenue streams are better positioned to absorb regulatory and tax-related headwinds.
- Gaming data providers are largely insulated from consumer-facing risks and could benefit from operating leverage as markets expand.
Read the full transcript below:
ANDREW: Time for Hot Picks in gaming and gambling. Our guest has DraftKings as his top pick, and he says the company’s expansion into predictions has created some uncertainty for near-term profit. But investors willing to hold the stock for more than a few months could be in for a good opportunity.We’re joined by Jason Tilchen, senior research analyst, digital gaming and entertainment, at Canaccord Genuity. Thanks very much indeed for joining us.
Just remind us now — DraftKings, we know, is a dominant player in sports betting, so they’re getting into this predictions industry. Can you remind us what that will involve, please?
JASON: Yeah, absolutely. Thanks for having me on. DraftKings is really a pure-play North American digital gaming operator, and growth over the past few years has been driven by an increasing percentage of the U.S. population gaining access to online gaming through state-by-state legalization, and increasing monetization of those users through product innovation.
The key debate at the moment, as you mentioned, surrounding the stock is the impact that prediction markets are having on the regulated sports betting industry. The short version is that prediction markets, which initially gained popularity during the 2024 presidential election, really started to take off last year when they began introducing sports contracts. They saw a spike in trading activity on these platforms during this past football season, particularly in states where sports betting is not legal.
They’re really able to do this by claiming these contracts are federally regulated swaps, exempt from state gaming laws. The reality is the matter is likely not going to be settled from a legal perspective for years and could end up going all the way to the Supreme Court.
As it relates to DraftKings, there are two issues for the stock today. The first is the level of investment they’re making in their own prediction app, which they launched at the end of last year, and the impact that’s going to have on 2026 margins. The second is that, based on the latest state data, there’s been a bit of a slowdown in engagement across the industry.
There could be a variety of factors driving that, particularly over a short period of time, but there’s concern from some investors that these prediction markets may be starting to have a cannibalization impact on regulated platforms. The combination of those two things has really pressured sentiment around the stock.
While we do expect shares to remain volatile until the company provides 2026 guidance in a few weeks, we think the selloff has ultimately created a very attractive valuation for a business we forecast will roughly double EBITDA to around $1 billion this year, even after those prediction-related investments, with additional top-line growth and margin expansion going forward.
ANDREW: Sorry, we’re really tight for time, but will this move into prediction markets alienate sports partners — the sports leagues — if DraftKings does that?
JASON: I don’t think it’s necessarily going to alienate them. They’ve taken a cautious approach. Each league has taken a different approach as well. The NHL and MLS are two leagues that have actually partnered with prediction markets. Others, like the NFL, are taking a more arm’s-length approach for now as this emerging industry develops. But they definitely take all stakeholders into account when making decisions around product innovation.
ANDREW: It really is amazing — the boom in gambling around the world. Flutter Entertainment, FLUT, in New York — what do they do?
JASON: It’s actually a pretty similar business to DraftKings, but in addition to having one of the leading platforms in North America by market share — FanDuel — they also have a portfolio of online and omnichannel gaming brands around the world.
A little over 40 per cent of their total revenue today comes from North America, with the balance from international markets. Their strategy has really been to acquire a local brand with a podium or near-podium position in attractive growth markets, and then pour gasoline on those businesses by applying best practices developed over the past two decades to drive share gains and operating efficiencies.
Same-game parlays are a very good example. That product was initially developed by Flutter in Australia back in 2016 and later brought to the U.S. and other markets. It allows them to generate more revenue per dollar wagered relative to other companies, which they can reinvest back into promotions and product development.
It’s a pretty virtuous flywheel that’s been driving strong retention and engagement across their global operating footprint. In addition to the prediction market dynamics we discussed in the U.S. market, they’ve also been facing tax increases in other markets, like the U.K.
The good news is we think all of that has more than been priced in at this point, with the stock down more than 20 per cent so far this year and nearly 50 per cent off its highs from last summer. This is a high-quality, diversified business with a strong management team, and for investors with a longer time horizon, we think this is a very attractive entry point, trading at less than 12 times consensus 2026 EBITDA.
ANDREW: And finally, Sportradar, SRAD — why do you think this one offers promise?
JASON: This is a pretty unique business. It’s more of a picks-and-shovels play on the global online sports betting market. They’re one of the leading data providers to sports betting and media companies.
They sit between the leagues — which they pay for the exclusive right to collect and distribute official data — and the sportsbooks and media companies that use it. For sportsbooks, especially larger operators like DraftKings and FanDuel, this low-latency data feed is mission-critical for their in-house pricing teams.
There are also hundreds of midsize and smaller sportsbook operators around the world, and Sportradar provides a variety of additional services, including managed trading services and odds feeds.
Beyond organic growth from the expanding global market, margins should continue to increase by roughly one to three percentage points annually. That’s because the company has largely completed its latest renewal cycle for key sports properties, which should limit growth in its largest expense. That, in turn, allows it to develop new products, enhance monetization of those rights and drive operating leverage over the next few years.
The stock has seen a sharp selloff due to negative sentiment across the sector, but it’s mostly unaffected by the issues challenging business-to-consumer operators. We think it’s been unfairly punished as a result, creating an attractive opportunity for investors.
ANDREW: Jason, thanks very much indeed. You covered a lot of ground there. Thanks on this industry that’s just exploding. Really appreciate it. Jason Tilchen, senior research analyst, digital gaming and entertainment, at Canaccord Genuity.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| DKNG NASDAQ | N | N | N |
| FLUT NYSE | N | N | N |
| SRAD NASDAQ | N | N | Y |
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This BNN Bloomberg summary and transcript of the Jan. 29, 2026 interview with Jason Tilchen 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.
