Business 4 min read By Arthur Ellington
DraftKings and Flutter Shares Jump After Court Rules Prediction Markets Are Gambling
A US federal court has ruled that prediction markets such as Kalshi are gambling rather than federally regulated financial trading, sending shares in sports betting groups DraftKings and Flutter sharply higher.
Shares in DraftKings and Flutter Entertainment rose sharply after a US federal court ruled that prediction markets are a form of gambling rather than federally regulated financial trading. The decision removes a potential competitive threat to established sports betting operators and clarifies that platforms such as Kalshi fall under state gambling law rather than the oversight of federal commodities regulators.
The ruling is a significant victory for the traditional sports betting industry, which had argued that prediction markets were effectively offering event contracts on sporting and political outcomes without being subject to the same licensing, tax and consumer protection rules as bookmakers. DraftKings and Flutter, which owns FanDuel, are among the largest operators in the US sports betting market and had seen their shares pressured by the rise of prediction market platforms.
The court found that the contracts offered by prediction markets are more akin to wagers than to financial derivatives. That distinction matters because it determines which regulator has authority over the products and which legal framework applies. If prediction markets had been deemed federally regulated trading venues, they could have operated across state lines with lighter oversight, potentially undercutting licensed sportsbooks.
Investors reacted positively to the clarity the ruling provides. DraftKings and Flutter both saw their stock prices climb as the market digested the implications for competition in the rapidly growing US betting sector. The decision reduces uncertainty about the regulatory landscape and reinforces the position of incumbent operators that have invested heavily in compliance and state-by-state licensing.
The case is part of a broader debate over the boundaries between financial innovation and gambling. Prediction markets have argued that their products are tools for hedging and forecasting, not betting. Regulators and traditional gambling companies have countered that when the underlying event is a sports match or an election, the product functions as a wager and should be treated as such.
For the UK-listed Flutter, the ruling offers a measure of relief as it continues to expand its US footprint. The company has been one of the most aggressive players in the American market since the repeal of the Professional and Amateur Sports Protection Act in 2018 opened the door to state-by-state legalisation. DraftKings, meanwhile, has built a leading position in online sports betting and daily fantasy sports.
The ruling does not resolve every question about prediction markets. It is likely to be appealed, and the regulatory picture could still shift as more states consider how to treat event contracts. But for now, the decision gives sportsbooks a clearer runway and removes a source of competitive anxiety that had weighed on valuations.
Analysts noted that the ruling could also influence how other jurisdictions approach the issue. If prediction markets are classified as gambling, they may face the same advertising restrictions, age verification requirements and tax obligations as traditional bookmakers. That would level the playing field and potentially slow the growth of platforms that had operated in a regulatory grey area.
The immediate market reaction underscores how sensitive betting stocks are to regulatory news. DraftKings and Flutter are among the most closely watched names in the sector, and any signal that their core business is protected from unregulated competition tends to be rewarded by investors. The ruling provides exactly that signal, at least for the time being.
