Morningstar

DraftKings and Flutter: NBA Joins NFL in Betting Restrictions; Prediction Firms Aren't Complying

We think DraftKings stock is significantly undervalued.

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Securities in This Article
DraftKings Inc Ordinary Shares - Class A
(DKNG)

Key Morningstar Metrics for DraftKings

  • Fair Value Estimate
    : $39.00
  • Morningstar Rating
    : ★★★★★
  • Morningstar Economic Moat Rating
    : Narrow
  • Morningstar Uncertainty Rating
    : High

On Oct. 16, the NBA announced a ban on player prop bets at risk of manipulation, following a similar action by the NFL in 2025. DraftKings DKNG and Flutter Entertainment are complying, while Kalshi and Polymarket are not. The NFL has asked the Supreme Court to help enforce its policy.

Why it matters: We don’t expect the actions to curb sports betting demand. We believe prediction market sports betting regulation is lacking, and the Supreme Court could eventually prohibit these wagers next year, bringing visibility and multiple expansion for the online gaming companies.

  • In 2018, a Supreme Court ruling gave states power to regulate sports betting. Recently, prediction market companies have offered sports event contracts, claiming they are derivative swaps and therefore regulated federally. Two of three appeal court rulings think otherwise.
  • NBA star Victor Wembanyama has opposed athletes promoting predictive sports markets, which target 18- to 20-year-olds. Athletes advertising prediction markets include LeBron James, Giannis Antetokounmpo, Bryson DeChambeau, Derek Jeter, and Eli Manning.

The bottom line: We have maintained our fair value estimates of $39 per share for DraftKings and $187 per share for Flutter, both narrow-moat companies. Investors are pricing in a dire environment, which could cap shares until there is regulatory visibility on prediction markets, perhaps in 2027.

  • We now model Flutter’s 2026-35 revenue growth to average 6.3%, with a 2035 EBITDA margin of 24.1%. Our 2026-35 sales growth and EBITDA margin forecasts for DraftKings are 8.1% and 24.9%, respectively. We think shares currently price in flat US sales and low-20s margins.
  • Amid prediction market betting, DraftKings’ core sportsbook volume has produced double-digit handle growth in recent months. But shares have not responded, driving our view that investors could await court rulings for clarity.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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