Taxes and prediction markets squeeze the betting giants as shares slide

A rough autumn for the market leaders

The two companies that dominate American sports betting spent late September moving in the wrong direction. DraftKings dropped about 4% to $20.92 on 23 September 2026, and Flutter Entertainment, which owns FanDuel, closed at $89.56 on 18 September, near a 52-week low and down roughly 69% from its high a year earlier. For a duopoly that controls most of the market, the slide reflects mounting doubts about profitability rather than demand.

Flutter's fall has been particularly steep. The company has cut its 2026 forecast four times this year and reduced FanDuel's profit outlook by 22% in its most recent update. On 21 September, Rothschild downgraded the stock to neutral and cut its price target to $119 from $169.

The tax squeeze

One pressure is coming from state capitols. As legal betting has matured, states have reached for it as a revenue source, and the newest tools bite hard. Illinois introduced a per-wager fee on online betting, and the effect has been immediate, with betting volume in the state falling around 15%.

The cost adds up across the map. Flutter has flagged roughly $40 million in additional tax exposure nationwide from rising state gaming levies. FanDuel still holds about 44% of the US sports-betting market and DraftKings 32% to 34%, but scale offers limited protection when the tax is charged on every bet rather than on profit.

The prediction-market dilemma

The second pressure is competitive. Prediction-market platforms such as Kalshi and the brokerage Robinhood have pushed into sports event contracts, reaching customers in states where traditional sportsbooks cannot operate. Rather than cede that ground, DraftKings is spending to compete: chief executive Jason Robins told investors the company expects to lift marketing and customer promotions, with some spending pulled forward from next year, to build its prediction-markets business.

Investors read that as a margin risk, which is why the shares fell even as the underlying signals looked healthy. DraftKings said it was approaching a double-digit share of consumer volume in sports prediction markets, and Robinhood ticked up 0.8% to $125.27 on the same day. The strategic bet is clear, but the near-term cost is spooking the market.

Our take

The demand story is not the problem. DraftKings said sportsbook handle was up 15% year on year at the start of the NFL season and maintained guidance of roughly $1 billion in adjusted core earnings for the year. Americans are still betting more, not less.

The squeeze is on the economics of serving them. Per-wager taxes attack the top line while the fight against prediction markets attacks the marketing budget, and the two arrive together. The operators that come through 2026 in the best shape will be those that can hold share without buying it, at a moment when both the taxman and the newcomers are making that harder.

For Flutter, the four forecast cuts are the real story: a company that lowers guidance repeatedly loses the benefit of the doubt, which is why a downgrade to neutral and a price target cut to $119 from $169 followed so quickly. For DraftKings, the gamble is that spending pulled forward into prediction markets buys a durable position before the courts decide whether those markets are even legal in much of the country. Neither bet is obviously wrong, but both explain why the shares fell in a month when Americans were betting more than ever.