Betting stocks experienced a significant downturn on Friday as emerging prediction market platforms gained traction in the sports wagering landscape. DraftKings Inc., Flutter Entertainment PLC, and other companies tied to the sports gambling industry saw their stock values decline following data indicating a shift in consumer preference towards prediction market startups.

DraftKings shares plummeted as much as 8.3% in New York trading, marking the stock's worst intraday drop since late October. Flutter, the operator of FanDuel, saw its shares decrease by as much as 5.5%, reaching their lowest intraday level since late November. The broader gambling sector also felt the impact, with an SP gauge of industry shares falling by as much as 2.5%.

The decline in betting stocks coincided with a surge in activity on prediction market platforms like Kalshi and Polymarket. These platforms, which recently introduced financial contracts linked to the outcomes of sports games, reported a significant increase in user engagement during the kickoff of the NFL playoff season. This rise in popularity occurred even as New York state data revealed a year-over-year decrease in online sports wagering revenues, a period typically considered a peak season for sportsbooks.

Online sportsbooks have faced increasing pressure in recent months due to the rise of prediction markets and their innovative sports contracts. These startups leverage their status as federally regulated exchanges to offer sports-related financial products, attracting users with a different approach to wagering.

The emergence of prediction markets presents a potential challenge to established sportsbooks. As these platforms continue to innovate and gain market share, traditional betting companies may need to adapt their strategies to remain competitive. The future of sports wagering could involve a greater integration of financial contracts and prediction-based models, potentially reshaping the industry landscape.