DraftKings, Flutter hit by Blumenthal letter, NCAA proprietary betting ban idea
While most gaming stocks rose, DraftKings (NASDAQ: DKNG ) and Flutter Entertainment (NYSE: FLUT's stock price plummeted on Wednesday.
Both stocks were down more than 6% in late trading, losses accelerated in part by NCAA President Charlie Baker unveiling a plan to ban proprietary betting on college games.
"The NCAA draws lines in the sand when it comes to sports betting to protect student-athletes and the integrity of the game — and the issues across the country in recent days show there is still work to be done," Baker said in a statement.
Baker, the former Republican governor of Massachusetts, appeared to be alluding to the NBA's newly launched investigation into questionable betting patterns by Toronto Raptors basketball player Jontay Porter.
Proposals or props are popular with sports bettors, including customers of DraftKings and Flutter’s FanDuel, because these bets offer the opportunity to bet on something other than sides or total score. Prop betting is also often part of a collectible game package, which is increasingly becoming a profit driver for gambling companies.
Blumenthal letter also adjusts DraftKings, Flutter
Reports that federal regulators may seek greater control over how online sportsbooks target potential problem bettors also weighed on shares of DraftKings and Flutter.
In a recent letter to executives of eight internet sports betting companies operating in the United States, including DraftKings and FanDuel, Sen. Richard Blumenthal (D-CT) said he is “deeply concerned” about tactics operators may use to lure the largest bettors to continue betting even after suffering huge losses.
“Instead of using this data to identify and proactively provide assistance, such as self-exclusion and treatment services, gambling operators are putting profits over people,” the senator wrote. “I urge you to use the data you collect to identify problem gamblers and proactively provide services to these individuals, such as trusted counselors, to help them access treatment.”
Blumenthal added that he wanted operators to stop marketing and promotions aimed at forcing "high value" bettors to "continue spending money through exploitative bonuses, points and inducements".
Research firm says 'overreaction' in stock market could be an opportunity
While DraftKings and Flutter shares were clearly affected by Blumenthal's letter and Wednesday's NCAA news, some analysts believe the sell-off was hasty. Research firm Craig-Hallum said the "equity overreaction" could be a buying opportunity.
The company supports the idea of banning NCAA prop betting, saying it would be good for gambling integrity. It added that such bets likely account for only a single-digit percentage of all bets on college games, and bettors would simply use their money for other bets if the ban were to take effect.
Jeffries acknowledged that Blumenthal's letter and Baker's plan to halt proprietary gaming were "unfortunately timed," and argued that Flutter would be "relatively better positioned to address the issue of tax increases on VIP programs and a possible ban on college gambling."
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Source: www.casino.org
