TLDR
- Hedge funds have made at least $2.3 billion in paper gains betting against gambling stocks in 2026, with Flutter Entertainment accounting for roughly $2 billion of that total.
- Flutter has lost more than half its market value this year, while DraftKings and Entain are each down around 30%.
- Short sellers Muddy Waters and Callisto triggered a 20%-plus single-day crash in Sportradar shares after accusing the company of ties to illegal gambling operators.
- Tax increases in European markets and the rise of US prediction markets are squeezing margins and creating uncertainty across the sector.
- Some analysts still see recovery potential, with Macquarie maintaining a bullish price target on Flutter and Genius Sports rebounding more than 20% from its lows.
The gambling industry’s rough 2026 has become a payday for hedge funds. According to the Financial Times, traders who bet against online gambling stocks have collected at least $2.3 billion in paper gains so far this year.
The bulk of those profits came from one company. Flutter Entertainment, which owns FanDuel and Paddy Power, has lost more than half its market value in 2026. Short sellers made roughly $2 billion from that decline alone.
DraftKings and Entain have also taken heavy hits. Both stocks are down around 30% this year. Short positions against DraftKings generated an estimated $351 million, while bets against Entain added tens of millions more.
Tax Hikes and Prediction Markets Pressure the Sector
The selloff has not been limited to the biggest names. In Sweden, Betsson has dropped roughly a third of its value this year. Raketech has also slipped. In France, FDJ United stumbled after its first-quarter earnings despite avoiding the worst of the downturn.
Several forces are hitting the industry at the same time. Tax increases across European markets, particularly in the UK, are squeezing profit margins for operators.
In the United States, the emergence of prediction markets is adding another layer of concern. These platforms increasingly overlap with traditional sports betting, raising questions about future competition and regulation.
The combination of rising costs and new competitive threats has made investors nervous about the sector’s near-term outlook.
Then came the Sportradar episode, which shook confidence further. Last month, short sellers Muddy Waters and Callisto publicly accused Sportradar of connections to illegal gambling operators.
Both firms had disclosed short positions before the allegations went public. On April 23, Sportradar shares dropped more than 20% in a single trading session.
Sportradar rejected the accusations and said it would challenge any claims that it knowingly worked with unlicensed operators. But the damage to sentiment was already done.
The incident reinforced a growing belief among traders that gambling stocks had become easy targets for activist short campaigns. Confidence in the sector was already weak, and the Sportradar situation made it worse.
Some Stocks Show Signs of Recovery
Not every company has been caught in the downturn. Playtech, Evolution AB, and Rank Group have avoided the sharpest declines.
There are also signs that some investors believe the selloff has gone too far. Genius Sports plunged earlier this year after announcing a $1.2 billion acquisition of Legend, a sports and gaming media group. The deal confused investors worried about strategic direction.
But since bottoming near $4.38, Genius Sports shares have rebounded more than 20%.
Analysts at Macquarie still hold a bullish position on Flutter. The bank’s price target sits well above current trading levels. Macquarie argues that Flutter’s core business metrics remain comparatively strong despite tax pressures in Britain and uncertainty around US prediction markets.
That optimism has not spread across the wider sector yet. For now, hedge funds remain on the winning side of the trade against gambling companies.
With regulatory costs rising and investor confidence still fragile, the industry’s publicly listed companies are heading into the second half of 2026 under sustained pressure.
