Short Sellers Have Made $2.3 Billion Betting Against DraftKings, Flutter, and Entain as Gambling Stocks Crater

Hedge fund short sellers have earned at least $2.3 billion in estimated profits betting against online gambling companies in 2026, according to data compiled by financial analytics firm S3 Partners. The numbers reflect a dramatic reversal of fortune for a sector that was widely treated as a high-growth investment just a few years ago. Flutter Entertainment, parent company of FanDuel and the world’s largest publicly traded gambling firm, has seen its share price fall more than 50 percent this year. Traders short on Flutter have accumulated estimated paper profits of approximately $2 billion. DraftKings short sellers have made around $351 million, while those positioned against UK operator Entain have gained approximately $35 million.

The implosion in gambling stock prices has been driven by two converging forces. The first is the rapid rise of prediction market platforms in the United States, which have pulled users toward contract-based wagering on sports, politics, and financial events that sits outside the traditional licensed sportsbook framework. The second is the imposition of steeper gambling taxes in the United Kingdom, which has squeezed margins for Flutter and Entain, both of which have significant British operations. Flutter reported a 17 percent first-quarter revenue increase but a 38 percent decline in net income, showing how rising costs are eroding profitability even as revenue continues to grow.

What This Means for Bettors Using DraftKings and FanDuel

For sports bettors who rely on DraftKings or FanDuel for their wagering, the short-selling activity has no immediate operational impact. Both platforms continue to run normally, process bets, and pay out winnings. The stock price pressure reflects investor concerns about long-term competitive positioning, not a crisis in day-to-day operations.

The longer-term implications are more nuanced. If prediction market platforms continue to grow their user base and capture wagering volume from traditional sportsbooks, the major operators may respond by cutting promotional spending, adjusting odds margins, or narrowing the range of markets they offer. Bettors who have benefited from the aggressive bonusing and competition of the past several years of market expansion could see some of that generosity reduced as operators focus more on profitability.

The Regulatory Wildcard

The trajectory of gambling stocks from here depends heavily on what lawmakers and regulators do next. Rhode Island has filed a lawsuit against prediction market platforms Kalshi and Polymarket, arguing they have cost the state millions in lottery revenue. Tennessee signed a law in May 2026 creating a criminal offense for prediction market manipulation. A federal framework that clarifies the legal status of prediction markets would dramatically reshape the competitive dynamics, either by legitimizing the platforms and accelerating their growth or by constraining them in ways that relieve pressure on traditional sportsbooks.

DraftKings itself has entered the prediction market space with its DraftKings Predictions product, suggesting the company is not purely playing defense. But the shift from a high-flying growth stock to one generating significant short-selling profits reflects how quickly the investment narrative around legal sports betting has changed as the competitive landscape has evolved beyond anyone’s initial projections.