Full Breakdown
Short Sellers Net Over $2 bn Betting Against Flutter and U.S. Sports-Betting Peers
5/25/2026, 8:35:49 PM
Short Sellers Rake in $2 bn+ as Gambling Stocks Plummet
Since the start of 2026, hedge funds have accumulated an estimated $2.3 billion (€2 bn) in paper profits by shorting shares of Flutter plc, DraftKings Inc., and Entain plc. Flutter’s stock, the world’s largest publicly-traded gambling group, has fallen more than 50 % year-to-date; DraftKings is down roughly 30 %, and Entain has lost a similar share-price share.
Market Pressures: Prediction Markets and UK Tax Levies
Two external forces have driven the sell-off. In the United States, “prediction markets” – binary-outcome contracts regulated as derivatives by the Commodity Futures Trading Commission – have surged, allowing bettors to bypass state-level sports-betting bans and taxes. In the United Kingdom, Chancellor Rachel Reeves’ November budget introduced higher levies on online casino games and betting, prompting Entain to record a £488 million impairment charge and prompting Flutter to warn that the new taxes are slowing growth.
Principal Actors: Funds, Companies, and Analysts
- Short-seller funds: DE Shaw (1.49 % of Flutter’s London shares), Two Sigma (2.17 % of Flutter), AQR Capital Management, Marshall Wace, Balyasny Asset Management, Millennium International Management, Capital Fund Management.
- Targeted gambling groups: Flutter plc (owner of Paddy Power, Sky Bet, Betfair), DraftKings Inc. (operator of FanDuel), Entain plc (owner of Ladbrokes, Coral, joint-venture BetMGM).
- Analysts: Brandt Montour, Barclays; Citi research team (downgraded Flutter to “sell”).
Numbers at a Glance
| Metric | Figure |
|---|---|
| Paper profit from short positions (Flutter, DraftKings, Entain) | $2.0 bn, $351 m, $35 m respectively |
| Share-price decline (2026 YTD) | Flutter > 50 %; DraftKings ? 30 %; Entain ? 30 % |
| Short-position size – Flutter (London) | Two Sigma 2.17 %; DE Shaw 1.49 % |
| Short-position size – Entain | Marshall Wace 1.7 % (April) |
| UK tax-related impairment (Entain) | £488 million |
| UK tax-related slowdown (Flutter) | Not quantified; cited as growth-rate drag |
Official Commentary
Barclays analyst Brandt Montour warned that investor sentiment toward U.S.-focused sports-betting firms has “reached extreme levels of pessimism.” Citi analysts, citing doubts about Flutter’s ability to meet U.S. profit targets, cut the rating from “buy” to “sell.” Several funds, including Marshall Wace and Capital Fund Management, declined to comment on their short positions.
Dissenting Views
Critics argue that the rapid expansion of prediction markets threatens the core wagering revenue of traditional operators, while the UK tax hike is seen as a punitive measure that could suppress industry investment. The same forces that depress share prices may also spur innovation in alternative betting products, a point highlighted by market observers.
Conflicting Outcomes & Information Gaps
Not all short bets have succeeded. Funds shorting Evoke (owner of William Hill and 888) lost about $3.5 million after the company rebounded >50 % from December lows amid takeover speculation. Montour’s suggestion of a possible “relief rally” for Flutter and DraftKings remains speculative, with no concrete timeline or policy change identified.
Verbatim Quotes
- “reached extreme levels of pessimism” — Brandt Montour, Barclays analyst
- “relief rally” — Brandt Montour, Barclays analyst
Outlook
Barclays anticipates that heightened regulatory scrutiny of prediction markets and ongoing legal debates over their classification could temper the current pessimism, potentially triggering a short-covering rally. Meanwhile, UK policymakers have signaled no immediate reversal of the new gambling levies, leaving the sector’s profitability and valuation outlook uncertain.
