Published on: December 15, 2025, 07:00h.
Updated on: December 14, 2025, 07:57h.
- Emerging prediction markets pose risks to non-investment grade lottery operators, according to financial analysts.
- Regional gaming operators depict a “mixed” outlook.
- Investors urged to exercise “increased scrutiny,” states finance advisers.
The rise of prediction markets intensifies competition within the gaming sector, potentially impacting several non-investment grade issuers, notes Neuberger Berman, an asset management firm.
A recent analysis by Neuberger Berman reveals that the “almost immediate nationwide legalization” associated with prediction markets could pose a threat to traditional gaming markets. The firm pointed out that lottery operators may find themselves particularly exposed to fluctuations from yes/no exchanges.
The firm emphasizes, “Non-investment grade entities within the lottery sector, which have experienced minimal legal competition in various regions until now, may face adverse effects,” states the asset manager.
In the United States, publicly listed lottery firms encompass Brightstar Lottery (NYSE: BRSL)—the organization behind Powerball—and Lottery.com (NASDAQ: SEGG). Both are rated as junk entities.
Neuberger Berman on Sports Betting Consequences
Neuberger Berman commented on DraftKings (NASDAQ: DKNG) and FanDuel’s upcoming forays into prediction markets without naming any particular sportsbook operators directly, but they indicated that significant financial commitments are anticipated.
“Recent developments regarding FanDuel and DraftKings regarding their moves into the prediction market arena—backed by several hundred million in startup investment—illustrate their pursuit of substantial opportunities amid significant market transformations,” remarks Neuberger Berman.
As the realm of prediction markets evolves, the asset manager advises stakeholders to implement “increased investment scrutiny and caution.”
Flutter Entertainment, which owns FanDuel, possesses a BBB- credit rating, classified as the lowest investment grade, while DraftKings holds a BB+, regarded as high junk grade, according to Fitch Ratings. Other digital sportsbook firms associated with parents having non-investment grades include Caesars Entertainment (NASDAQ: CZR) and Penn Entertainment (NASDAQ: PENN), both of which are substantial brick-and-mortar conglomerates currently seemingly refraining from extensive investments in prediction markets.
States ‘Left Out’
A key reason why prediction market platforms like Kalshi and Robinhood face an array of legal hurdles is their lack of state gaming licenses, preventing states from taxing event contracts as seen in permitted jurisdictions. Neuberger Berman acknowledges that states are often “left out” of the tax collection loop for prediction markets, possibly pushing them to endorse alternative betting methods to improve revenue streams.
“In the interim, the swift nationwide legalization of a gambling-adjacent product has the potential to disrupt established gambling sectors. It might also accelerate the broader legalization of gambling across the nation, with states competing for possible tax revenues within taxable gambling avenues,” reflects the asset manager.
Neuberger Berman concurs with other specialists who believe a Supreme Court ruling may be necessary to clarify jurisdictional and regulatory matters surrounding prediction markets, although such a resolution could take numerous years.