Kalshi (KALSHI) has generated huge trading volume during the football season, with the NFL accounting for 42% of all volume and sports, in general, accounting for 75% of volume on the prediction market exchange. Cumulative trading volume on Kalshi has jumped from $6 billion in mid-August to over $10 billion in mid-October due to the influx of attention from football bettors over the last two months.
The threat of prediction markets such as Kalshi (KALSHI) and Polymarket (POLYMARKET) has hung over the sports betting sector, including pure play stocks such as DraftKings (NASDAQ:DKNG) and FanDuel owner Flutter Entertainment (NYSE:FLUT).
However, Needham thinks those fears may be overstated. Analyst Bernie McTernan pointed out that prediction market volume fell off last week for the NFL and non-NFL. While one week was noted to not make a trend, McTernan said the firm found the downturn in volume interesting.
“We think OSB operators, particularly DKNG and FLUT offer a better product than prediction markets currently, namely offering more markets and better personalization,” highlighted McTernan. It was noted that prediction market operators may be attracting significant volume from unregulated markets and from people under 21 across the U.S., who can’t use sports betting apps. “We do not think volume growth for Kalshi means it has to be coming from OSB operators,” he wrote.
Needham has a Buy rating on both DraftKings (NASDAQ:DKNG) and Flutter Entertainment (NYSE:FLUT).
Shares of DraftKings (DKNG) are down 17% over the last six weeks, while Flutter Entertainment (FLUT) is off 10%.
The other big players in sports betting are Fanatics (FANA)/PointsBet, Bet MGM (MGM) (OTCPK:GMVHF), Caesars Sportsbook (CZR), Bet365, and ESPN Bet (PENN).