Short-seller research outlet The Bear Cave published its latest report on DraftKings Inc Thursday, arguing that prediction markets are pulling users away from traditional sportsbooks and that the risk is not priced into the stock. The report, now owned by Hunterbrook Media, notes that DraftKings shares have fallen roughly 40% since its first report on the company, and the bear case is even stronger now due to the competitive threat of prediction markets.

Prediction Market Momentum

The Bear Cave believes that Kalshi’s growth will ultimately come at the expense of DraftKings, first slowly, then rapidly. The report points to Kalshi’s scale, citing Dune data showing the prediction market platform has surpassed $100 billion in cumulative volume and is running roughly $10 billion in weekly notional volume. Although investors believe prediction market risk is priced into the stock given its recent decline, The Bear Cave said it strongly disagrees.

User Traffic and Product Comparison

The Bear Cave cited a July 6 Apptopia report that found daily active users at DraftKings, FanDuel, BetMGM and Caesars peaked June 15 during the World Cup before fading 32% to 41% by month-end, while Kalshi and Polymarket kept climbing. According to that data, the share of DraftKings users who also opened Kalshi rose from 12% on June 1 to 17.4% on June 22. The report argues that traffic is moving in one direction because prediction markets offer a better product and better distribution.

Comparing World Cup winner markets, the report stated a $100 position on Spain returned $167.48 on Kalshi versus $166 on DraftKings Predictions, with similar gaps on England and Argentina. The newsletter also noted DraftKings Predictions users cannot place limit orders. DraftKings reported roughly $11.3 billion in annualized trading volume for the week ended June 21, representing about $217 million for the week, which The Bear Cave called comparatively sluggish given a recent promotion offering new users $200 prediction dollars.

Competitive Landscape and Analyst Views

Competition in the category is expanding. Kalshi did $31 billion in notional volume in June, up more than 70% from May, with sports contracts making up about 85% of activity. Polymarket’s international exchange set a monthly record at $10.8 billion, and Rothera processed $2 billion in its first month. Kalshi was reportedly seeking funding at a $40 billion valuation last month, up from $22 billion in May.

The Bear Cave argued regulatory risk cuts into the industry’s favor, citing President Donald Trump’s recent Truth Social post saying the CFTC’s exclusive authority over prediction markets must be maintained. Not everyone shares the view; Morningstar sees prediction markets as more opportunity than risk, TD Cowen raised its price target to $35 from $30, and JPMorgan maintained an Overweight rating and lifted its target to $34 from $31.

TD Cowen and JP Morgan have both raised their price targets for DraftKings (NASDAQ: DKNG), reflecting an updated outlook on the company's valuation and market position. TD Cowen analyst Lance Vitanza maintained a Buy rating and increased the target to $35 from $30. Separately, JP Morgan analyst Daniel Politzer maintained an Overweight rating and lifted the target to $34 from $31. These adjustments indicate continued confidence in the stock's potential.

Rating and Target Details

The revised price targets represent increases from previous levels, with both firms retaining their positive stances on the shares.