DraftKings, Flutter slide as NYSE owner invests in Polymarket

Shares of DraftKings (DKNG) and Flutter Entertainment (FLUT) are under pressure on Tuesday following the news of IntercontinentalExchange’s (ICE) $2B investment in Polymarket, a crypto-based betting platform. Of note, unlike casinos or sports-betting operators such as DraftKings and Flutter, prediction markets aren’t under state regulation and can usually operate around local restrictions.

INVESTING IN POLYMARKET: IntercontinentalExchange announced a strategic investment in Polymarket. Under the terms of the agreement, ICE will invest up to $2B in Polymarket, reflecting a valuation of approximately $8B pre-investment. Alongside its investment, ICE will become a global distributor of Polymarket’s event-driven data, providing customers with sentiment indicators on topics of market relevance. Additionally, ICE and Polymarket have also agreed to partner on future tokenization initiatives. The investment consideration will be in cash and is not expected to have a material impact on ICE’s 2025 financial results or expected capital return plans. ICE will further discuss its strategic investment in Polymarket on its third quarter earnings call scheduled for October 30.

The news has sent both DraftKings and Flutter’s shares into negative territory. It also comes as the casino industry annual trade show kicks off in Las Vegas. One panel expected to take place during the event is focusing on prediction-based betting markets like those operated by Polymarket, Kalshi and Robinhood (HOOD).

NOTABLE: Last week, Benchmark lowered the firm’s price target on DraftKings to $43 from $53 and kept a Buy rating on the shares. With business pressured by the “usual suspects,” including unfavorable sports outcomes and elevated promotional expense, as well as a difficult macro backdrop and the rise of prediction markets having shaken investor confidence, the firm thinks Q3 looks “potentially challenging,” the analyst tells investors in a preview. However, the firm remains constructive on DraftKings’ long-term growth opportunity, the analyst added.

On Monday, Jefferies lowered the firm’s price target on DraftKings to $51 from $54, while keeping a Buy rating on the shares and removing the stock from the firm’s “Franchise Pick” list. The firm updated the company’s model to reflect the “unfavorable” trends in Q3 of low September hold and elevated promotional spend. These equate to a $150M headwind to DraftKings’ adjusted EBITDA in the quarter, the firm tells investors. Jefferies believes that while the pushing out of earnings is challenging for shares in the near term, the company’s longer-term earnings power remains.

PRICE ACTION: Shares of DraftKings and Flutter have dropped over 5% to $33.20 and $234.90, respectively, in Tuesday afternoon trading.