DraftKings Would Feel Little Impact from College Prop Betting Ban, Say Analysts

A proposed ban on college proposition wagers would likely have minimal impact on DraftKings (NASDAQ: DKNG), according to sell-side analysts covering the company.

Several analysts chimed in on the matter on Thursday. That was a day after shares of the online sportsbook operator and rival Flutter Entertainment (NYSE: FLUT), the parent company of FanDuel, slumped on news that NCAA President Charlie Baker said the organization wants to halt prop bets on college athletic events to bolster integrity.

Rather, he views the specter of higher taxes on online sports betting as potentially more concerning to the young industry.

Other Analysts Defend DraftKings

With New Jersey policymakers floating a plan to potentially raise taxes on iGaming and sports betting, and Sen. Richard Blumenthal (D-CT) saying more federal oversight of how operators target “high-value” bettors is needed, this week’s news flow for DraftKings, Flutter, and the industry at large has been negative.

However, Wall Street is still in DraftKings’ corner. JPMorgan told clients that Wednesday’s sell-off was overdone, while reiterating an “overweight” rating and $55 price target on the stock. That implies upside of 21% from Thursday’s close.

Of the 32 analysts with ratings on DraftKings, 24 grade the stock the equivalents of “strong buy” or “buy.”

A Different View

JMP Securities analyst Jordan Bender had a somewhat different take on the college prop betting ban. In a note to clients on Thursday, he pointed out that in 2023, college sports drove $1.6 billion of revenue for regulated U.S. online sportsbook operators, while accounting for about 15% of the overall handle.

He added that with prop wagers increasing in popularity, $200 million in revenue could be at risk, based on 2023 figures, if a ban is enforced.

At the end of the day, bettors will find a way to wager on events and players, and we believe the effort to ban individual player betting will likely only push players back offshore, while we estimate over 50% of wagers today are in the United States,” wrote Bender.

He did note that the mix of player prop bets on college games is lower than what’s found on professional sports.