Sports betting ETFs are experiencing a buildup in activity as DraftKings Inc (NASDAQ:DKNG) shares plummet, highlighting the way growing competition from prediction platforms is spilling over into ETF markets based on gaming and gambling.
DraftKings is under pressure. Check its prices, live.
Sports Betting ETFs Feel The DraftKings Chill
Leveraged and inverse products like Defiance Daily Target 2X Long DKNG ETF (NASDAQ:DKNX) and T-REX 2X Long DKNG Daily Target ETF (BATS:DKUP), which offer double exposure to DraftKings’ day-to-day performance, have also seen their trading volumes surge to reflect selling pressure. The two ETFs are now acting as high-octane sentiment indicators of the stock’s volatility.
DKNX, which rises twice as much when DraftKings rises and vice versa, has fallen more than 49% in the last four weeks as investors hedge against more losses. The fund is down almost 11% on Friday.
Again, DKUP, which provides leverage to the upside on the same stock, has fallen in lockstep with DraftKings’ drop. It is down more than 50% in the past four weeks. The fund slid almost 13% on Friday.
The Roundhill Sports Betting & iGaming ETF (NYSE:BETZ), the biggest fund to follow the sports betting industry, has dropped about 10% in the last month after DraftKings, one of its most highly weighted holdings, declined over 27%. On Friday, the fund lost more than 2%.
Prediction Markets Disrupt The Playing Field
The latest drag on DraftKings-linked ETFs stems from the explosive growth of Kalshi, a prediction market platform that recently raised $300 million to reach a $5 billion valuation, according to The New York Times.
Kalshi's surge in global volume has stoked fears of long-term disruption in traditional sportsbooks, prompting ETF investors to reassess exposure to legacy betting names.
Analysts Are Not Part Of The Panic
Nonetheless, ETF investors may just be just resetting exposure, instead of giving up on the theme entirely. With DKNG technically oversold and sports seasonality on the horizon, the setup for a mean-reversion trade through ETFs such as DKUP could be attractive.
On Thursday, Berenberg upgraded its rating on DKNG from Hold to Buy, buoyed by the company’s impressive growth and margin expansion. Berenberg, in its note, said that the current "sell-off is overdone," and the company's fundamental performance has remained unchanged.
Mizuho also retained its Outperform rating on the company, which suggests that analysts are relying on the fundamentals rather than the company’s competitive threats.
This optimism around DKNG can bode well for ETFs exposed to DraftKings.
Read Next:
Photo: Shutterstock
© 2025 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
