Published on: May 26, 2026, at 03:01h.
Updated on: May 26, 2026, at 03:01h.
- Hedge funds gain nearly $2.4 billion by shorting three major sportsbook stocks
- The stocks in question include DraftKings, Entain, and Flutter
- Evidence shows minimal short covering has occurred in these stocks
This year, a number of prominent sportsbook stocks have become prime targets for hedge fund short sellers, leading to an estimated $2.3 billion in paper profits for these investment managers.
Since the beginning of 2026, bearish hedge funds have focused their efforts on DraftKings (NASDAQ: DKNG), Entain Plc (OTC: GMVHY), and Flutter Entertainment (NYSE: FLUT), which owns FanDuel. These bearish stances have proved profitable as DraftKings and Entain have each experienced declines of about 30% for the year, while Flutter’s shares have plummeted nearly 56%.
A report from The Financial Times reveals that short sellers have realized gains of approximately $2 billion, $351 million, and $35 million from shorting Flutter, DraftKings, and Entain, respectively. These figures represent paper profits, implying that these hedge funds still hold these positions, although data suggest that portions have been covered. This trend in short selling has attracted prominent hedge funds to the market.
Numerous significant hedge funds have amplified their bearish positions against Flutter throughout 2026, including DE Shaw, Two Sigma, AQR Capital Management, Marshall Wace, and Balyasny Asset Management,” according to HedgeWeek. “Marshall Wace, Millennium Management, and Capital Fund Management have also established substantial short positions in Entain.”
Short interest in Entain, which owns half of BetMGM, remains relatively low, while Flutter’s short interest is at 5.57%, based on Seeking Alpha’s data. Meanwhile, DraftKings’ short interest sits at 7.27%, according to Seeking Alpha.
Key Factors Fueling Bearish Sentiment on Sportsbook Stocks
The factors motivating hedge funds and other bearish traders to focus on sportsbook stocks are familiar issues that have been surfacing over the past year.
The primary concern revolves around the competitive threats posed by prediction markets and stringent regulatory frameworks in the UK. Increased wagering taxes in the UK pose significant challenges for Entain and Flutter, both of which are major operators in that market.
On the other hand, DraftKings sidesteps this issue as it operates solely within North America. However, analysts warn that the emergence of platforms like Kalshi and Polymarket could disrupt DraftKings’ business model and investment appeal.
While sportsbook stocks have proven perilous for long-term investors this year, the same cannot be said for iGaming-focused operators that showcase limited exposure to predictive vulnerabilities. For instance, stocks like Rush Street Interactive (NYSE: RSI) and Super Group (NYSE: SGHC), which does not operate in the US, have risen by 35.87% and 9.21%, respectively, year-to-date.
Challenges Inherent to Short Selling Sportsbook Stocks
Short selling carries substantial risks due to the potential for unlimited losses, as there’s no ceiling on how high a stock price can rise. Experienced traders strive to avoid reaching that point, but there remain inherent risks when betting against DraftKings, Entain, and Flutter.
In particular, there’s speculation that MGM Resorts International (NYSE: MGM) might pursue another acquisition attempt for Entain or seek to buy it out of BetMGM. In either scenario, Entain’s stock would likely surge, putting pressure on shorts to cover their positions.
As for DraftKings and Flutter, both companies operate their own prediction market platforms, and if they can demonstrate progress, it may ignite bullish sentiment, creating discomfort for short sellers in the market.