Hedge Funds Make Billions Betting Against Gambling Giants

Short sellers have targeted some of the biggest names in the gambling industry as hedge funds continue to bet against gambling stocks. Data from S3 Partners shows that traders wagering on falling share prices have amassed an estimated $2.3 billion in profits in 2026 alone. Much of that has been from positions against Flutter Entertainment, DraftKings, and Entain.

Prediction Platforms Present a Rising Challenge

According to a recent Financial Times report, Flutter, the world’s largest publicly traded betting company, has taken the hardest hit. Since January, its stock price has dropped by more than half, translating into roughly $2 billion in profits for short-sellers. DraftKings stock has also struggled, falling about 30%, while Entain has seen a similar drop in London trading.

While this downturn cannot be explained by one single reason, all operators suffer from broader market uncertainty. Prediction markets have been growing rapidly, posing an immediate threat. These platforms, often framed as a new form of financial trading, offer products similar to sportsbooks. However, they are not constrained by traditional regulatory and tax frameworks.

That dynamic has raised fears that established operators could lose their foothold in a market they helped create. The shift has been enough to dampen investor sentiment, as some analysts describe the mood around US-focused betting companies as deeply pessimistic. As long as such uncertainty remains, these stocks will face sustained pressure.

Some Analysts Are Not So Pessimistic

A different challenge has arisen across the Atlantic. In the UK, higher taxes on online betting and casino products have burdened operators. Entain has already taken a substantial impairment charge due to the new levies, while Flutter Entertainment has warned that this shift could lead to slower growth in 2026 and beyond.

The gambling sector has become an attractive target for hedge funds due to a combination of regulatory pressure and shifting consumer behavior. D. E. Shaw & Co. and Two Sigma Investments have doubled down on shorting positions in Flutter. Others, such as Marshall Wace and AQR Capital Management, have made similar bets across several gambling stocks.

However, some operators are faring better than others. Shares in Evoke have rebounded,  costing short sellers millions. Some analysts, such as Truist Securities’ Barry Jonas, believe that investor sentiment may shift in the opposite direction depending on regulatory developments. There are also early hints of stabilization in parts of the gaming sector, even as broader economic concerns remain.