Since the Supreme Court’s historic decision on PASPA seven years ago, institutional investors have become accustomed to erratic, see-saw moves among top sports betting stocks.

As leading gambling companies continue to report full-year 2024 earnings, the current period is no exception. Following a post-Super Bowl bump, bullish sentiment returned to the space with a bevy of prominent names soaring 15%+ in the span of a week. The optimism, however, has faded somewhat as a wave of states have proposed tax hikes on sports betting in an attempt to capitalize on elevated revenue projections for 2025.

On Tuesday, New Jersey Gov. Phil Murphy included a line item in the state’s fiscal year budget that would raise the tax rate for revenues on online sports betting and iGaming. The proposal follows action in several other states aimed at raising tax rates on online gambling exponentially. Murphy’s power play has been met with criticism across the gambling community, which argues that it ignores the benefits the regulated market maintains over an unlicensed one.

“Raising taxes only makes New Jersey’s market less competitive, driving players toward platforms that aren’t regulated and that the state can’t benefit from,” wrote Jeff Ifrah, general counsel for iDEA Growth. “Instead of undermining a proven model, policymakers should recommit to strengthening the legal market that has made New Jersey a leader in the U.S.”

Paring Early 2025 Gains

When DraftKings reported quarterly earnings on Feb. 13, the company placed an emphasis on its renewed focus with live betting. Weeks after the completion of DraftKings’ acquisition of in-game modeling platform Simplebet, the sportsbook detailed plans to prioritize in-play wagering in the coming months. In outlining the methodology, DraftKings CEO Jason Robins drew comparisons to the European market where in-play betting represents about 75% of all wagers.

“We’re going to continue to figure out ways to better create products that appeal to customers,” said Robins on the earnings call. “I just think with the natural evolution and maturity of the customer base, people are going to try new sports — they’re going to try new bet types, and that will lead to more live betting.”

In 2024, DraftKings grew revenues by approximately 30% to $4.8 billion, while reporting positive free cash flow for the first time in company history. DraftKings also offered fiscal year 2025 revenue guidance of $6.3 billion to $6.6 billion, which represents growth in excess of 30%. Bolstered by the results, DraftKings closed the week ended Feb. 14 at $53.49 a share, up 25%.

But concerns around heightened tax rates have led to a pullback in stocks. The New Jersey proposal comes after a number of states have increased tax rates on sports betting revenues.

Last year, Illinois scrapped a flat tax regime for a new tiered-rate system, with the highest tranche increased to 40%. Ohio, another top Midwestern state, has a proposal to double the current rate of 20%. DraftKings fell 5% on news of the proposal in the Garden State, trading around $42 a share.

Additionally, a proposal in Massachusetts seeks to increase the tax rate on sports betting revenue to 51%. If passed, the Bay State will join New York and New Hampshire with the nation’s highest rate. The measure is not expected to pass.

CFTC Roundtable On Prediction Markets

The sports betting industry is also waiting on bated breath for the latest regulatory developments in Washington on so-called event contracts. The contracts offered on prediction markets such as Kalshi give participants the ability to purchase derivatives on a wide range of political, economic, and cultural events.

Kalshi, which offered the contracts on the 2024 U.S. Presidential Election, made its sports debut during the NFL playoffs.

Earlier this month, the U.S. Commodity Futures Trading Commission (CFTC) announced that it will convene a roundtable on prediction markets.

Robins noted on the earnings call that DraftKings will closely monitor the developments. If the CFTC clears event contracts on sports outcomes, it will be possible for individuals to wager on sports in states that have not legalized sports betting.

Flutter, the parent company of FanDuel Sportsbook, will conclude earnings for companies in the sports betting space next week. Amid a slew of unfavorable sports outcomes in last year’s fourth quarter, Flutter projects U.S. quarterly revenues of $1.59 billion. Flutter also estimates U.S. Adjusted EBITDA of $161 million for the period.

At present, FanDuel and DraftKings maintain a virtual duopoly on market share across the industry.