DraftKings (NASDAQ: DKNG) stock could benefit from court rulings against sports event contracts offered by prediction market operators.

Mizuho analyst Ben Chaiken suggests that the absence of sports derivatives on prediction markets could lead to a rebound by DraftKings.

Chaiken points out that in recent court rulings, prediction market operators have not been successful in defending their sports-driven contracts, indicating potential challenges ahead for the industry.

The analyst maintains an “outperform” rating and a price target of $45 on DraftKings, signaling a 73% upside from the current closing price.

Legal Debate in Prediction Markets

Amid legal battles against prediction markets by various states, the industry faces scrutiny for potentially operating as unlicensed sportsbooks.

Chaiken believes that the conflicting rulings in the appeals courts could lead to a Supreme Court showdown, which could act as a catalyst for DraftKings stock.

There are speculations that the Supreme Court may not want the Commodity Futures Trading Commission (CFTC) overseeing sports wagering in the country.

With the previous ruling on PASPA, the Supreme Court emphasized states’ rights in regulating sports betting, hinting at a possible outcome in sports-related cases.

Impact on DraftKings Stock

Over the past year, DraftKings and Flutter Entertainment have faced challenges from prediction markets, impacting their stock performance.

Analysts believe that if the Supreme Court rules against prediction markets, companies like DraftKings could benefit by refocusing on their core competencies without the competitive threat.

Investors are waiting to see if the Supreme Court will take up a prediction market case, potentially not happening until 2027.