The stock of Flutter Fun Plc, which runs one of the most popular US gambling apps, FanDuel, is on an eight-week skid, its longest in 23 years. It’s main competitor, DraftKingsis trading at its lowest level since 2023, and has fallen more than 60% from its all-time high five years ago.

The Seattle-New England showdown — which has less celebrity appeal than last year’s Taylor Swift-soaked event — is partly to blame. But the bigger worry that hangs over the industry is the rise of prediction markets like Kalshi, which did nothing last year to offer a new way of betting on sports, bypassing state-level gambling regulations that prevent the spread of old gambling apps.

Jordan Bender, senior equity analyst at Citizens, expects record breaking volume trading in the prediction market this weekend at the same time that legal betting in traditional sportsbooks – or management as it is known – fell 2% from last year.

“A big part of why we think Super Bowl management is going away is that the prediction markets are taking a bite out of that,” Bender said.

It’s a reversal of fortune for gambling companies that seemed to be riding high in recent years as American scrutiny of gambling began after a 2018 Supreme Court decision that allowed states to legalize sports betting. The amount bet on the Super Bowl has grown for eight years in a row.

The threat to these businesses comes from unexpected directions. Until early last year, Kalshi, the leading US prediction market startup, used its status as a federally regulated financial exchange to offer niche financial contracts tied to pop culture events and elections. The agency that oversees all of this, the Commodity Futures Trading Commission, has indicated that the so-called activity contracts tied to the games are not limited.

Then Donald Trump won the election. Kalshi tested the waters by offering its first Super Bowl bets in early 2025 and the CFTC is not involved in stopping it. Those first contracts were little more than an experiment, but sports now account for more than 90% of Kalshi’s trading volume.

Many industry analysts still expect existing US sportsbooks to get a record haul at this year’s Super Bowl. Ed Birkin, a senior analyst at H2 Gambling Capital, predicted that total bets – before taking into account prediction markets – will jump 9% from last year, to $1.78 billion. But he said he expects the prediction markets to attract $630 million in bets for the Super Bowl and have an 80% year-over-year growth in betting activity for the event.

Wall Street analysts’ average fourth-quarter adjusted earnings per share for Flutter fell a whopping 49% over the past three months, according to data compiled by Bloomberg, while revenue expectations took a 6.3% hit. For DraftKings, revenue estimates fell 29% while revenue estimates fell 2.6% over the same period.

Some gambling executives say prediction markets don’t threaten them in the states where they already operate and instead are gaining ground in the dozen or so states where traditional online gambling isn’t allowed, including big ones like California and Texas.

BetMGM, which has its own online sports app, announced this week that it attracted record sports bets in the fourth quarter of 2024, helping to drive a 63% jump in revenues from a year ago.

“We don’t see any impact that we can identify as being due to the prediction markets,” the company’s chief executive officer, Adam Greenblatt, said in an interview.

Greenblatt said newcomers also get most of their business from highly skilled bettors — known as sharps — who tend to be less profitable for gambling companies.

Read More: Gambling Pros Tune in to a Super Bowl in Prediction Markets

Older gambling apps, on the other hand, are running up against the limits of their expansion across the country, after the rapid growth that immediately followed the Supreme Court decision. This year, the only new state to allow legal betting on the Super Bowl is Missouri, a relatively small market.

“The Super Bowl 60 outlook shows a transition from expansion-driven growth to incremental growth as almost all states with a viable path to legalization are alive,” Benchmark analyst Mike Hickey wrote in a note to clients on January 29.

However, even in states where gambling is legal — the strongholds of DraftKings and FanDuel — there are signs of weakness. About 10% of DraftKings users were also using Kalshi in January, and Kalshi’s app downloaded four times more as FanDuel or DraftKings, according to data firm Apptopia.

Part of the appeal of Kalshi is that it uses a novel structure to open up betting on everything from the length of the halftime show to the likelihood that Jeff Bezos will attend the event, while DraftKings and FanDuel focus almost exclusively on the scoring and outcome of the game.

“Kalshi’s growth has been fueled by ad campaigns, earned media, social virality and, above all, greater depth, breadth, and distribution compared to traditional online sportsbooks,” analyst Edwin Dorsey wrote in one of several recent Substack posts about why he’s bearish on DraftKings.

DraftKings and FanDuel are taking the threat seriously. In December they both launched their own prediction market apps, which are now available in all states where their traditional apps are not allowed. But together they got less than 100,000 downloads in January, compared to Kalshi’s 1.9 million downloads, according to Sensor Tower data.

On Friday, DraftKings announced that it has partnered with another early prediction market exchange, Crypto.com, to offer a wider range of event contracts.

Gaming regulators in several states have gone to court to try to shut down Kalshi and its affiliates, and many analysts believe these cases will eventually go to the Supreme Court. But in the meantime, the new chairman of the CFTC, Michael Selig, recently indicated that he will allow sports contracts to continue and does not plan to hand over territorial management to the states.