DraftKings, Flutter Drubbed by Bank of America Downgrades
Posted on: November 4, 2025, 02:48h.
Last updated on: November 4, 2025, 03:31h.
- DraftKings, Flutter extend declines on Bank of America downgrades
- Bank sees bumpy hold patterns emerging
- Analyst also mentions tax risks
Shares of sportsbook giants DraftKings (NASDAQ: DKNG) and Flutter Entertainment (NYSE: FLUT) extended recent weakness on Tuesday after Bank of America (BofA) downgraded both stocks.
In a new report to clients, analyst Shaun Kelley lowered his ratings on DraftKings and the FanDuel parent to “neutral” from “buy,” citing structural hold issues, among other factors. Hold refers to the percentage of money retained by sportsbooks after winning wagers are paid out.
Structural hold is not looking so structural anymore,” observes Kelley. “We are now taking a harder look at the model and baking in lower hold amid the volatility.”
As has been widely documented, DraftKings, FanDuel, and some rivals have again been pinched by bettor-friendly football outcomes. Over the past two years, structural hold rates for the final three months of the year have disappointed by an average of 200 basis points.
Due to what BofA estimates to be weak September and October hold, Kelley pared his third- and fourth-quarter earnings before interest, taxes, depreciation, and amortization (EBITDA) estimates on DraftKings and Flutter by $150 million and $100 million, respectively.
DraftKings, Flutter Could Face 2026 Tax Risks
Following a year in which Illinois, Louisiana, and New Jersey raised online sports betting taxes and other states considered similar moves, DraftKings and Flutter could face renewed tax headwinds in 2026 as states look to bolster revenue.
Kelley called state-level tax risk “never-ending,” adding that the investment community hasn’t fully priced into shares of DraftKings and Flutter the possibility that multiple states will increase sports betting levies next year.
“Worst case, states could actually try to offset [prediction market] cannibalization by raising taxes on incumbents,” notes the analyst.
Specific to Flutter, which has significant operations outside the US – a trait not shared by DraftKings – that company could face tax headwinds in its home market of the UK. It’s rumored that when British Chancellor Rachel Reeves delivers the UK Autumn Budget on November 26, the plan could call for higher gaming taxes. As BofA’s Kelley notes, UK regulatory issues have historically been drags on shares of Flutter.
Prediction Market Concerns Still Alive
These days, it’s nearly impossible to discuss DraftKings, Flutter, and other sports betting equities without mentioning prediction markets, and while some analysts argue event contract exchanges aren’t solely to blame for the recent weakness encountered by online gaming stocks, Kelley doesn’t go that far.
The BofA analyst said sportsbook operators continue to face prediction market challenges, including the specter of a potential price war, while grappling with “regulation and legal maneuvering.” Some states have warned sports betting companies that if they venture into prediction markets, their gaming licenses could be jeopardized.
DraftKings delivers quarterly results on Thursday, and it’s likely the “perfect storm” Kelley references will be a point of emphasis on the conference call.
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