In November 2025, Bank of America made a significant decision impacting two major players in the sports betting industry. DraftKings and Flutter Entertainment saw their stock ratings dropped to neutral, reflecting growing concerns over market dynamics and regulatory pressures. The bank’s analysis pointed to fluctuating betting margins and potential state tax increases as key reasons for the downgrade, underscoring the financial uncertainties both companies face.
A telling sign of the industry’s struggles is the observation by analyst Shaun Kelley, who remarked that the “structural hold is not looking so structural anymore.” This insight reflects a broader sentiment of caution, as market assumptions are adjusted to accommodate a rapidly changing environment. With these downgrades, BofA suggests that both DraftKings and Flutter may see their stock values move in unison, responding to a complex mix of regulatory, tax, and competitive pressures. This convergence may lead to intensified marketing and pricing competition in the U.S. sports betting market.
DraftKings, once a dominant force in the U.S. iGaming sector, has seen its market share dwindle from 27% to 23% over the past two years. This decline in market presence coincides with mounting tax and promotional expenses, which continue to erode profit margins. Consequently, the bank revised its 2026 EBITDA estimates for DraftKings from $1.26 billion to $1 billion, adjusting the price target from $40 to $35. These changes reflect a more conservative outlook on the company’s long-term earnings potential amidst a challenging business landscape.
Flutter Entertainment, while possessing a more diversified portfolio through its FanDuel brand, is not immune to these market headwinds. The company has experienced a slowdown in handle growth, hovering around a modest 5% year-to-date. Additionally, Flutter faces potential tax harmonization in the UK and rising state-level taxes in the U.S., which could further compress margins. BofA’s revised 2026 EBITDA forecast for Flutter dropped from $4.24 billion to $3.66 billion, with a corresponding reduction in the price target from $325 to $250.
Looking ahead to 2026, DraftKings and Flutter must brace for continued tax challenges as states aim to bolster revenues. Kelley highlighted the persistent nature of state-level tax risks, suggesting that the market has yet to fully digest the possibility of increased sports betting taxes. For Flutter, the company’s substantial operations outside the U.S., particularly in the UK, pose additional tax-related risks. With growing support among UK Labor Party MPs for higher gambling taxes, the potential for legislative changes looms large, driven by a desire to redirect funds towards social welfare initiatives.
The impact of these market pressures is further compounded by the evolving landscape of prediction markets. DraftKings recently ventured into this area with the acquisition of Railbird, a move that has already influenced its stock performance and ratings. However, challenges persist, including the specter of a price war and regulatory hurdles that could jeopardize sports betting licenses. As the industry grapples with these issues, the potential for strategic recalibrations remains significant.
Amidst this backdrop, it is crucial to consider alternative perspectives. While some analysts emphasize the challenges and uncertainties, others point to opportunities for growth and adaptation. The dynamic nature of the sports betting industry, characterized by technological advancements and evolving consumer preferences, presents avenues for innovation and expansion. Companies that can effectively navigate the regulatory landscape and harness emerging trends may find themselves well-positioned for long-term success.
In conclusion, the downgrades of DraftKings and Flutter by Bank of America reflect a complex interplay of market dynamics, regulatory challenges, and evolving consumer expectations. As these companies navigate an uncertain landscape, the ability to adapt and innovate will be paramount. While the road ahead may be fraught with challenges, the potential for strategic realignment and growth remains within reach.
David Garato is a luminary in gaming journalism, renowned for peeling back the curtain on the gaming world with his witty and insightful commentary. A decade into weaving stories from the pixelated edges of indie games to the expansive universes of AAA titles, David’s work is a thrilling blend of analysis and adventure. When not writing, he’s live-streaming, sharing his gaming exploits with an engaged and growing audience. David doesn’t just write about games; he lives them, making him a trusted guide in the gaming community.
