Sports Betting Giants’ Stocks Tumble Amid NCAA Prop Bet Threat

Shares of prominent online sports betting companies DraftKings and Flutter Entertainment took a hit on March 27 as regulatory concerns and proposed NCAA actions rattled investor confidence.

NCAA President’s Proposal Sparks Debate on Sports Betting Integrity

The market jitters stemmed from multiple fronts. Firstly, NCAA President Charlie Baker ignited fears by suggesting a potential ban on proposition bets, commonly known as prop bets, in college games. This proposal, aimed at safeguarding student-athletes and preserving the integrity of competitions, sent shockwaves through the industry.

Prop bets, which allow betting on specific outcomes unrelated to the final score, have gained popularity among sports bettors. However, concerns over their impact on the sanctity of the game have prompted Baker’s call to action.

Baker wrote that there is a growing concern about sports betting issues nationwide, emphasizing that prop bets often result in harassment of student-athletes and professional athletes. He mentioned that the NCAA has been collaborating with states to address these challenges, noting that many states are responding by implementing bans on college prop bets.

Maryland and Ohio, for example, have already taken steps to ban player-specific proposition bets on college sports, citing concerns about the safety of student-athletes and the integrity of collegiate competitions. 

Furthermore, a letter from Sen. Richard Blumenthal to several online sportsbook operators, including DraftKings and FanDuel, added fuel to the fire. Blumenthal expressed deep concerns over tactics used by these operators to encourage excessive betting, particularly targeting problem bettors. 

He urged them to prioritize player well-being over profits and to take proactive measures to identify and assist individuals with gambling issues.

Market Reacts with 6% Drop in DraftKings and Flutter Stocks

The market response was swift and severe, with DraftKings and Flutter stocks plummeting by over 6% in late trading. Yet this market reaction might have been an overreaction, presenting a potential buying opportunity. The proposed NCAA ban on prop bets could impact betting volumes marginally, however, it could enhance industry integrity in the long run.

The concerns over regulatory scrutiny were further compounded by recent reports of federal lawmakers scrutinizing online betting companies’ VIP programs, reported The Wall Street Journal. Sen. Blumenthal highlighted how these programs incentivize high-spending gamblers, potentially exacerbating gambling addiction issues.

Blumenthal’s move underscores growing bipartisan concerns regarding the rapid expansion of online sports betting and its potential societal impacts. Furthermore, Sen. Blumenthal together with Rep. Andrea Salinas recently introduced the GRIT Act which proposes allocating 50% of federal sports betting excise tax revenue toward treating and preventing gambling addiction, aiming to combat the growing crisis fueled by the exponential expansion of sports betting in the US.