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Top of the Stocks: Why Gambling Shares Have Lost Their Shine

By jili tutorial · September 23, 2026

Top of the Stocks: Why Gambling Shares Have Lost Their Shine

The Investment Pitch That Died

For the best part of a decade, the gambling industry sold investors a straightforward story: more betting would mean more growth. It was an appealing pitch—easy to understand, supported by a steady stream of legalisation wins across the United States, and underpinned by ever-improving technology. Gambling shares were dressed up as growth stocks, and markets obliged.

That narrative is now breaking down. Entain’s removal from London’s blue-chip FTSE 100 index is the clearest symbol yet of how far gambling stocks have fallen out of favour, on both sides of the Atlantic. The decline is not a blip. It is a structural repricing of the entire sector, driven by a fundamental change in what investors want from these companies.

Growth is no longer enough. The market wants to see profits, cash generation, and a regulatory environment that will not spring unpleasant surprises. And for many gambling firms, particularly in the online sports betting space, those things have become increasingly hard to deliver.

Entain’s Demotion: A Symptom, Not a Cause

Solid numbers, shrinking share price

Entain’s relegation from the FTSE 100 is not the story of a company losing ground in every area of its business. Look at the operational numbers, and the picture looks reasonable. In the six months to June, Entain’s online net gaming revenue rose 7% in constant currency. Revenue in Britain and Ireland grew by 13%, and management maintained full-year guidance for online net gaming revenue growth of 5% to 7%.

None of that stopped the company’s share price from falling sharply over the past year. The disconnect between how the business is performing on the ground and how the market values it tells you everything you need to know about the shifting priorities of investors.

The issue, in short, is not that Entain is a bad business. It is that the market no longer values gambling companies based on the promise of future growth. Instead, investors are demanding evidence that growth can be translated into durable, profitable cash generation—and that the business can navigate a much more complicated regulatory and tax landscape.

What the market really wants

Ed Birkin, managing director at H2 Gambling Capital, a sector research firm, argues that the decline in gambling stocks goes far beyond changes to earnings forecasts.

“The industry share price declines have been much more severe than the cut to earnings projections,” Birkin notes. “That means that, while there may be some weakening in some companies’ fundamental growth drivers, the valuations that investors are putting on them have been the main driver of share price declines—although weaker fundamentals lead to lower valuations, so the reality is that they’re completely intertwined.”

The point is an important one. There is rarely a single villain in a market sell-off. Earnings have been shaved, yes. But the more significant shift is that investors are applying a much higher risk premium to gambling stocks. A dollar of forecast earnings is simply worth less today than it was a few years ago, because markets demand a bigger reward for holding these shares.

The Flutter Effect: Why a US Listing Wasn’t Enough

Flutter’s American adventure

Entain was not the first London-listed gambling giant to feel the heat. Flutter Entertainment, the owner of sports betting giant FanDuel, made an arguably more significant symbolic move when it began trading on the New York Stock Exchange in January 2024. Flutter later went further and shifted its primary listing from London to New York.

On the surface, the plan appeared to work. Flutter’s market capitalisation stood at about $36 billion when it debuted on the NYSE, and within 18 months it had climbed to roughly $50 billion. Shareholders had access to deeper US capital markets, and the company was able to tap into the enthusiasm of American investors for all things related to sports betting.

But the good times did not last. As earnings expectations were lowered across the industry, Flutter’s share price followed the rest of the sector downwards. In the second quarter of 2026, Flutter’s US revenue fell 6% to $1.683 billion, with sportsbook revenue down 15%. US adjusted EBITDA fell sharply, and the company subsequently cut its guidance.

A K-shaped market

Ben Robinson, managing partner at research firm Corfai, argues that the US listing achieved exactly what it set out to do. The problems came afterwards—and they were problems that no amount of NYSE branding could fix.

“The question was which arm of the K-shaped market Flutter would end up on,” Robinson says. “We have the answer now. Capital is concentrated in a narrow band of technology names and everything else is being marked on earnings.”

The “K-shaped” description is a popular way of characterising markets in which some companies—typically large-cap technology firms with strong cash flows and AI exposure—thrive, while everything else struggles to attract capital. Gambling companies, despite their online credentials, have fallen into the wrong branch of that divide.

A US listing can improve access to capital, but it does not make the underlying business more attractive. London has a capital-markets problem. Gambling has an investment problem. The two overlap, but they are not the same thing.

The Growth Story Was Already Wobbling

The pre-Covid slowdown

It is tempting to view the gambling sector’s problems as a post-Covid phenomenon—a reaction to the end of low interest rates and the internet-era boom. Frank Fantini, founder and publisher emeritus at industry research firm Eilers-Fantini, thinks that timeline is wrong.

“There is a tendency to look at the world as pre-Covid and post-Covid,” Fantini says. “But the decline in gaming began earlier than that with the slowdown in new jurisdictions and new projects.”

By the late 2010s, the US land-based casino market was maturing. The number of obvious greenfield opportunities was shrinking, and the big casino operators were finding it harder to identify new geographies with the same high-growth potential. The easy expansion phase—marked by new properties in Macau, Singapore, and a wave of US states approving commercial casinos—was coming to an end.

The online betting promise

That was where online gambling came in. The rapid expansion of legal sports betting across US states offered a new chapter of growth, and the market priced it in quickly—perhaps too quickly. Shares of companies like Flutter, DraftKings, and Entain were valued at levels that assumed legalisation would spread quickly and smoothly, with limited regulatory friction and abundant profit margins.

Neither of those assumptions held. Legalisation happened more slowly than expected. Where it did happen, it was accompanied by higher taxes and intense competition. And as costs accelerated, the gap between the dream and the reality became difficult to ignore.

Chad Beynon, managing director and head of US research at Macquarie Capital, says the sector is being hit by a pair of forces: a broad repricing of growth-oriented internet and software stocks, and a genuine deterioration in expectations for parts of the gambling industry.

“Sports betting companies have suffered particularly badly,” Beynon explains. “The market is questioning both future earnings and the size of the eventual opportunity.” By contrast, more iGaming-focused operators such as Rush Street Interactive and Super Group have held up better, helped by stronger earnings growth and profitability.

The lesson is simple: gambling still attracts capital when the money is visible. It is far less attractive when the payoff seems to lie in the distant future.

Prediction Markets: The New Rival on the Block

A new kind of competition

The biggest new uncertainty in US sports betting is not a higher tax bill or a regulatory clampdown—it’s prediction markets. These platforms, which allow users to bet on everything from election outcomes to the result of a football game, represent a direct challenge to the traditional sportsbook model.

The American Gaming Association estimates that Americans will wager $29.5 billion through legal sportsbooks during the 2026 NFL season—essentially flat compared with the $29.4 billion handle recorded the previous year. That stagnation, against a backdrop of national expansion, is a red flag. It suggests that the sports betting market in the US is no longer growing at the rate investors originally hoped.

Benjamin Robinson of Corfai has described prediction markets as “the main event” in the US betting landscape. His point is not simply that customers are abandoning sportsbooks for prediction platforms such as Kalshi, Robinhood, Crypto.com, and even DraftKings’ own prediction-market operation. It’s that sportsbooks no longer enjoy the protected market they once had.

A valuation threat, even without proof of harm

Chad Beynon argues that, so far, prediction markets have had a larger effect on valuations than on fundamentals. And that distinction matters. The mere existence of a new competitor is not proof that sportsbook revenue will collapse. But valuations are not built on certainty; they are built on confidence. A loss of confidence in future growth can be enough to send share prices tumbling.

Robinson puts it more starkly. The arrival of prediction markets breaks the assumption of protection that sportsbook investors had long relied upon. Even if prediction markets never take a massive share of the sports betting market, the fact that they exist as an option changes the conversation.

Sportsbooks fight back

The industry is not surrendering. DraftKings has moved into prediction markets, while Flutter is developing its own offering through FanDuel. Rather than simply eliminating a threat, prediction markets could become an additional source of revenue.

But that comes with its own tension. Entering the prediction market space requires investment, at exactly the time shareholders are demanding better returns. Flutter’s recent results highlight the tightrope walk: US adjusted EBITDA fell sharply in the first half of 2026, even as the company ploughed money into FanDuel Predicts and other growth initiatives.

The opportunity is real. But so is the cost.

Entain: A Different Kind of Crisis

The UK tax squeeze

While Flutter and DraftKings are fighting the prediction market battle in America, Entain has a more immediate, more grinding problem at home: the UK government’s attitude toward gambling taxes.

In April [2026], the UK government raised Remote Gaming Duty (RGD) from 21% to 40%. Then, from April 2027, a new 25% General Betting Duty rate for remote betting will apply—although remote bets on UK horse racing are excluded from the new rate. Entain said the higher RGD had a £56 million negative impact on its first-half EBITDA.

The UK is not the only jurisdiction looking more aggressively at gambling taxation, but it is the one that matters most to Entain. In Britain, operators are having to contend with government policy and higher taxes. In America, the main threat is competition. The problems are different, but they hit the same group of stocks.

A debt story

Entain’s share price weakness is also a story of balance sheet pressure. The company reported approximately £3.6 billion of net debt at the end of June, with reported leverage of 3.1 times underlying EBITDA. Online underlying EBITDA fell 5% in the first half, despite 7% growth in online net gaming revenue.

That gap between revenue growth and EBITDA decline reflects the squeeze from higher taxes and rising operating costs. It is precisely the kind of dynamic that concerns investors, and it explains why Entain’s share price has remained under pressure even as its top-line numbers have continued to grow.

Simplifying the portfolio

Entain’s response has been to simplify the business. The company has agreed to sell an initial 20% stake in Entain CEE for €425 million, implying an enterprise value of roughly €2.1 billion. Proceeds from the transaction, and any future exit, will be used to reduce debt and, subject to hitting leverage targets, return excess capital to shareholders.

This is not the strategy of a company chasing hypergrowth. It is the strategy of a business trying to prove that it is a well-managed, cash-generating enterprise that is undervalued by the market. That may be the right call for Entain’s shareholders. But it is a very different investment story from the one that used to define gambling stocks.

Four Stocks, One Sector, No Single Trade

It would be a mistake to treat Entain and Flutter as identical investment cases. Although the broader sector has been repriced, each of the major players is dealing with its own set of challenges and opportunities.

Flutter Entertainment: quality carries a price

Flutter has arguably the strongest online gambling franchise in the world, with FanDuel maintaining its lead in the US sportsbook market. At the time of writing, Flutter’s share price had fallen from $282.33 on 18 September 2025 to $89.56 on 18 September 2026, with a market valuation of $15.54 billion.

Chad Beynon calls Flutter “the highest-quality online betting franchise globally,” with FanDuel’s leadership position offering “significant long-term value.” But that quality comes with high expectations. As the market matures, investors are increasingly questioning how much future earnings growth can be generated from that leading position.

DraftKings: the operational dreamer

DraftKings is a different proposition. The company’s share price fell from $43.30 on 18 September 2025 to $21.75 by the close of trading last week, reflecting growing doubt about its path to sustained profitability. Beynon argues that DraftKings “arguably offers the greatest operational upside if it can continue converting strong customer growth into sustained profitability.” Its push into prediction markets could also prove an advantage if the new channel proves complementary to sportsbook betting.

MGM Resorts International: the land-based laggard

MGM Resorts International rounds out the four-company comparison, but it belongs to a different corner of the market. Unlike its online-focused peers, MGM’s fortunes remain tied to its land-based properties in Las Vegas and Macau, alongside its BetMGM joint venture with Entain. Its exposure to the online betting wars is more indirect, which means it is unlikely to benefit from the prediction market boom—but it is also less exposed to the repricing of pure-play internet gambling stocks.

Entain: the turnaround play

Entain, meanwhile, is a business in transition. Its UK operations face the prospect of significantly higher tax rates over the next two years. Its international ambitions have been scaled back in favour of a more focused, higher-margin strategy. And its balance sheet, while not alarming, is leveraged enough to limit the amount of capital available for buybacks or special dividends.

Conclusion: The New Rules of Gambling Investing

The gambling industry has not stopped growing. It has stopped being a guaranteed growth stock trade. Online gaming remains profitable, and the structural shift toward mobile betting will continue. But investors are no longer paying a premium for companies that promise growth at all costs. They want to see profits, cash flow, and a clear plan for dealing with regulatory and tax risk.

Entain’s demotion from the FTSE 100, Flutter’s failed attempt to escape the sector’s problems by moving to New York, and the rise of prediction markets have all contributed to the industry’s new, harsher reality. The story that gambling shares once told—effortless expansion, endless new markets, ever-rising valuations—is over.

The companies that will thrive in this new era are the ones that can generate real cash returns even as the easy growth disappears. The ones that cannot will find that the market’s patience has run out—just as it has for so many other businesses that promised the world but could not deliver a profit.