Published on: November 4, 2025, at 02:48h.
Updated on: November 4, 2025, at 02:49h.
- DraftKings and Flutter experience further declines after Bank of America downgrades
- Bank of America notes emerging volatile holding trends
- Analyst warns of potential tax hazards
Shares of leading sportsbooks DraftKings (NASDAQ: DKNG) and Flutter Entertainment (NYSE: FLUT) continued their downward trajectory on Tuesday following downgrades from Bank of America.
In a detailed report, analyst Shaun Kelley adjusted his ratings for DraftKings and the parent company of FanDuel from “buy” to “neutral,” highlighting concerns over structural hold issues and additional factors. The term “hold” refers to the percentage of funds retained by sportsbooks after payouts to winning bettors.
“Structural hold is starting to appear less reliable,” Kelley commented. “We are reassessing the model and factoring in lower holds due to ongoing volatility.”
As previously reported, DraftKings, FanDuel, and others have been facing challenges due to outcomes favored by bettors in football games. The average structural hold rates during the last quarter of the previous two years have fallen short by approximately 200 basis points. Given what BofA estimates to be underwhelming hold rates in September and October, Kelley has reduced his EBITDA forecasts for DraftKings and Flutter for the third and fourth quarters by $150 million and $100 million, respectively.
Potential Tax Challenges for DraftKings and Flutter in 2026
After states such as Illinois, Louisiana, and New Jersey increased online sports betting taxes in the past year, DraftKings and Flutter may face renewed tax challenges in 2026 as states look to enhance their revenue streams.
Kelley described state-level tax risks as “ever-present,” indicating that the investment community has not fully accounted for the likelihood that several states will increase sports betting taxes next year.
“In the worst-case scenario, states might attempt to counteract market cannibalization by raising taxes on established operators,” noted the analyst.
Particularly for Flutter, which has a notable presence outside the US—a feature not shared by DraftKings—there are potential tax implications in its UK home market. Rumors suggest that during the UK Autumn Budget announcement on November 26, Chancellor Rachel Reeves may propose higher gaming taxes. As Kelley from BofA points out, regulatory issues in the UK have historically posed challenges for Flutter’s stock performance.
Ongoing Concerns Related to Prediction Markets
It has become essential to address DraftKings, Flutter, and other sports betting equities in the context of prediction markets. While some experts argue that event contract exchanges are not solely responsible for the recent downturn in online gaming stocks, Kelley takes a cautious stance.
The BofA analyst stated that sportsbook operators are still navigating hurdles posed by prediction markets, which include the threat of potential price wars and the complexities of “regulation and legal maneuvering.” Several states have cautioned sports betting firms that engaging in prediction markets could jeopardize their gaming licenses.
DraftKings is set to release its quarterly results on Thursday, and it is likely that the “perfect storm” referenced by Kelley will be a focal point during the ensuing conference call.