The traitors
Investors bail on DraftKings and Flutter, as analysts keep the faith
OSB top-two sell-off renewed on cannibalization fears.
In +More: Allwyn completes PrizePicks stake buyout.
Markets: High Roller soars, Betsson slumps.
RSI and Goldman Sachs among those eyeing prediction developments.
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Show of faith
Stand by me: Analysts maintained their message discipline on Flutter Entertainment and DraftKings last week, but it wasn’t enough to stop investors from indulging in a further bout of selling on fears that OSB is being cannibalized by prediction markets.
Macquarie said on Thursday that Flutter’s FanDuel was “positioned for the largest outperformance” in the quarter just gone.
Earlier in the week, Truist stated it became “increasingly clear” last year that DraftKings and FanDuel are “in a league of their own” in US online.
Banished: The optimism on both Flutter and DraftKings can be set against a renewed bout of selling on Friday, after investors put two and two together on a surge in prediction markets volume for the NFL play-offs and a WoW fall in New York GGR.
DraftKings plunged 8% on Friday, leaving it down 6% for the week, while Flutter had a 10% deficit for the week, dropping 6% on Friday.
Go figure: The cannibalization fears were driven in part by the New York data for the week to January 11, which showed GGR falling 50% YoY to $37.3m in the week of the play-offs. This also represented a WoW drop-off of 50%.
Handle of $550m, meanwhile, was down 2% YoY while marketwide data for December presented by Jefferies showed same-state handle was down 1% YoY in December.
New Jersey’s December stats, released on Friday, showed handle down 11% YoY to $1.03bn but with GGR rising 84% to $114m.
The Jefferies team offered a couple of justifications for poor hande, including one less Sunday this year and a poor slate of Christmas games.
Go Bears: Against the NY January OSB data, Bloomberg reported the analysts at Piper Sandler as saying that Kalshi volumes hit a record $720m for the NFL play-offs, with the Bears and the Packers match-up being the first game to surpass $100m.
Holdsmobile: The irony of the sell-off being driven by fears over declining hold is that much of the positivity from the analysts stems from what they see as a somewhat unheralded boost in NFL hold through Q4.
Looking at likely hold rates across the three months, Macquarie estimates FanDuel’s hold rate in the last two months of the year was 14%, while DraftKings hit 10%.
The analysts estimate this will add $200m to adj. EBITDA for FanDuel and an incremental $50m for DraftKings.
It brings their Q4 adj. EBITDA estimates to Street highs of $450m for FanDuel and $273m for DraftKings.
The hold picture was confirmed by Rush Street Interactive, whose CEO Richard Schwarz told Needham analysts during a fireside chat last week that November and December were “much better results for football.”
Come closer and see: Optimism permeates other pre-Q4 previews. Stifel noted the evidence of improving same-store OSB handle growth and “still healthy” iCasino increases, albeit moderating from 30%+ to 20%+.
Truist, meanwhile, said DraftKings had leading product and profitability with “continued strong underlying customer acquisition.”
The team added they saw evidence from the last quarter that DraftKings had gained market share at FanDuel’s expense.
In a recent note, Jefferies also affirmed their enthusiasm for DraftKings, in particular, with the analysts cautioning investors against “[losing] the forest for the trees.”
See into the dark: Goldman Sachs, meanwhile, put the case last week for Flutter to be a big winner from predictions. In a note, the analysts said the new Predicts app could generate anywhere between $1.4bn and $4.5bn in revenue by 2029.
This would add an incremental $140m-$680m in adj. EBITDA by the same target date.
Notably, the team said that as it stands, there are “no discernible signs of cannibalization of the existing sports-betting market in our US state-level gaming trackers.”
Just follow your eyes: They added that international comparisons – notably in the UK – suggested customers “typically prefer to use a sportsbook when both products are available.”
Similarly, Jefferies said in their own preview note that they remain “convinced” a full OSB offering is “superior” to a prediction market offering.
They added that, in their opinion, the market consensus is underestimating Flutter’s ability to “monetize prediction markets and sustain US leadership.”
Taking a similar positive line, Texas Capital said in a recent Flutter initiation note that “ultimately” prediction markets will work to increase the OSB TAM, thus benefiting existing regulated operators.
E+M PRO – Earnings Previews
DraftKings
Here’s a prediction for ya: Prominent among the “great questions” likely to be faced on the Q425 call will be what the analysts can gather from the early days of the Predictions app launched late last year. Positivity emanates from the earnings preview notes, helped by suggestions that DraftKings will benefit from buoyant hold and market share gains against FanDuel. The Maine iCasino news will also likely be top of the agenda, with DraftKings tipped to be a winner with its existing tribal relationship.
See today’s Earnings Extra edition (PRO subs only).
Flutter
Tough at the top: The multiplicity of issues that Flutter has encountered in the past year helps explain why the company is no longer the largest company by market cap within the sector. Investors will be seeking some answers to questions around prediction markets, US OSB, UK tax and the situation in India.
See tomorrow’s Earnings Extra edition (PRO subs only).
Preview calendar
Jan 20: Penn Entertainment
Jan 21: BetMGM
Jan 22: Rush Street Interactive
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+More
Allwyn has completed its previously announced acquisition of a majority stake in PrizePicks, taking a 62% holding in the leading North American DFS operator for $1.53bn, excluding any performance-based earnouts. Allwyn said the deal strengthens its US footprint and supports its strategy to build a diversified global entertainment platform.
Bally’s Chicago is seeking a 12-month extension to keep operating its temporary casino at Medinah Temple, as construction delays push back the opening of its permanent River West casino. The company’s host agreement originally required the full venue to open by September 2026, but Bally’s now expects the project to slip into 2027.
Off to never-never land: Metallica are reported to have signed up for a run of 12 to 16 shows between October and December at the Sphere in Las Vegas, according to the Las Vegas Review-Journal.
Quote of the week
Creative what now? “Since debuting in SoHo in late 2024, The Corner Store has become one of the most coveted reservations in the country. It’s now a go-to destination for food enthusiasts and A-listers looking for elevated service, an energetic atmosphere and a standout beverage program centered on creative martinis.” MGM Resorts announces a new restaurant at The Cosmopolitan.
Markets
High times; The winner for this week with a share price increase that is unlikely to be matched this year is High Roller Technologies, which with one announcement about entering the prediction market space soared over 540%.
The company followed the main announcement with a flurry of announcements for letters of intent (LOI) or signed deals with third-party marketing partners.
These include a deal with The Lines, owned by major shareholder Spike Up Media, and LOI with Forever Network and Leverage Game Media.
Modesty blaze: The other notable winner for the week was ‘the little engine that could’ that is Evoke, which managed a far more modest 8% uplift against a generally anemic week for sector stocks.
It left Evoke with the pleasingly symmetrical market cap of £111m, which, it should be noted, is only ~£5m more than High Roller, which ended the week worth $143m or ~£106m.
Hitting the skids: Betsson was the worst performer of the week, down over 21% on Friday (-22% for the week), after it issued a profit warning saying Q4 EBIT is expected to be 24% below the prior-year period at €53m. Revenue is expected to be down 1% at $304m.
EBIT contributions were not divulged but a major culprit for the shortfall is the B2B business – read supply into Turkey – where revenues are expected to fall 13% to €71m.
In a brief statement, CEO Pontus Lindwall pinned the falling profit figure on “significant” product investment and higher personnel costs, which rose 15% to €52m.
Betsson will report its Q4 and FY25 numbers on February 5.
Mis-shapes: Similarly hit by a profit warning this week was GiG Software, down 14% after it said that a promised licensee in Brazil had now delayed its launch, causing the company to “re-shape” its 2026 outlook.
Meanwhile, investors were also continuing to give Bragg Gaming the bargepole treatment following its warning the week before.
Lost in the wake: Lastly, the prediction markets-related malaise affecting DraftKings and Flutter is also taking down data+ suppliers Sportradar, off by 8%, and Genius Sports, which was down 4%.
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Watching, waiting
The watch word: On the hot topic of prediction markets, speaking during the aforementioned fireside chat during the Needham conference, RSI CEO Richard Schwarz repeated the message that the company was “watching and monitoring the response from the state regulators.”
As it stands, he added, the business was not seeing any competitive threat. “The success of the prediction markets is really focused on those markets that don’t have legal sports betting,” he said.
“As long as prediction markets are sticking around, that’s where it’s going to impact.”
It’s a ‘no’ from me: As for potentially entering the space, Schwarz was decidedly lukewarm. “We certainly don’t have a need or a passion to go drive a national sports market predictions product with our brands,” he said.
“You talk about aggression, Kalshi is everywhere, Polymarket is everywhere, the others are coming and will be everywhere,” he added.
“And a lot of them are focusing on national advertising because you can reach almost every state through the way it’s being run today.”
Will you go with me? On the opportunity presented by the surprise regulation of iCasino in Maine, Schwartz made a pitch to the remaining two that don’t already have a market access partner.
“It would make sense for a tribe to want us to be their partner because we have really the best yielding revenue-generating casino product in the industry,” he claimed.
“We have the product, we’ve proven ourselves working with partners very effectively to grow a nice market share, and we have a poker platform that most others don’t have.”
Learning curve
As wise as Solomon: Goldman Sachs CEO David Solomon took the opportunity of the bank’s Q4 earnings call to tell analysts that prediction markets were “super interesting,” saying he has met with two “big prediction companies” within the past fortnight and “spent a couple of hours with each to learn more.”
“We have a team of people here that are spending time with them and are looking at it,” he said.
The duck test: Noting prediction markets are CFTC-regulated, he added that they “look like derivative contract activities.”
“And so I can certainly see opportunities where these cross into our business.
Solomon said Goldman Sachs was “very focused on understanding the regulatory structure that’s going to develop,” around prediction markets.
He added that there might be opportunities for GS to “have capabilities or to partner to serve our clients” in the space.
Coldman Sachs: Solomon did pour a touch of cold water on some of the more enthusiastic commentary emerging from with the bigger prediction markets providers.
He noted that the “pace of change” around prediction markets “might not be as quick and as immediate as some of the pundits are talking about in both of these.
Product placement
Catena Media has launched an expanded version of its vowel-deficient MRKTPLAYS+ sub-affiliation program, which it hopes will “deepen strategic partnerships” across the regulated North American online casino and sports-betting markets. The updated model introduces a modular framework to help publishers and adjacent digital businesses scale more efficiently once product-market fit is proven.
So my supervisor (Carl) suggested I “find alternative ways to contribute.”
I’m interpreting this as “grow the LinkedIn page or get decommissioned.”
Follow Octoplay at:
https://mt.linkedin.com/company/octoplay-op
Thanks,
Octobot
Upcoming earnings
Jan 22: IG Group
Jan 27: Evoke
Jan 28: Las Vegas Sands
Jan 29: Rank
Feb 5: Evolution, Betsson, Boyd Gaming
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