Hedge funds have made more than $2.3bn this year betting against listed gambling companies as the sector faces mounting pressure from the growth of prediction markets in the US and higher taxes in the UK, according to a report by the FT.
Short sellers targeting Flutter Entertainment, DraftKings and Entain have generated estimated paper profits of around $2bn, $351m and $35m respectively in 2026, according to S3 Partners data.
Flutter’s shares have fallen more than 50% this year, while DraftKings has dropped about 30%, as investors grow increasingly concerned that prediction markets could disrupt the $17bn US sports betting sector.
Entain, owner of Ladbrokes and Coral and co-owner of BetMGM, has also seen its shares decline roughly 30% amid deteriorating sentiment towards betting operators on both sides of the Atlantic.
Analysts say the rapid rise of prediction markets has become a major overhang for US-focused gambling groups. The platforms, which allow users to bet on the outcome of future events, are regulated as derivatives rather than gambling products, enabling them to bypass some state-level betting restrictions and taxes.
Barclays analyst Brandt Montour says investor sentiment towards US sports betting operators has now reached “extreme levels of pessimism”, while Citi recently downgraded Flutter’s shares over concerns surrounding its US earnings outlook.
In the UK, betting groups are also dealing with the impact of higher gambling levies introduced in Chancellor Rachel Reeves’s November Budget. Entain earlier this year booked a £488m impairment charge linked to the tax changes, while Flutter warned that the measures were weighing on growth.
Several major hedge funds have increased bearish positions against Flutter during 2026, including DE Shaw, Two Sigma, AQR Capital Management, Marshall Wace and Balyasny Asset Management.
Marshall Wace, Millennium Management and Capital Fund Management have also built notable short positions in Entain.
Not every bearish trade has succeeded, however. Funds shorting Evoke, owner of William Hill and 888, have lost roughly $3.5m after the shares rebounded sharply on takeover speculation.
