Short Sellers Have Made $2.3 Billion Against Gambling Stocks in 2026

Not everyone is bullish on the betting boom. Short sellers have racked up roughly $2.3 billion in paper profits in 2026 by wagering against the share prices of the biggest listed gambling companies, including DraftKings, Flutter Entertainment and Entain. The trade has paid off even as the industry talks up its best-ever betting season, a striking disconnect between the headlines and the share price.

The Bear Case

The skeptics’ argument comes down to profitability. After years of heavy spending to grab customers, investors want the big operators to convert all that revenue into durable earnings, and the doubters are betting they will struggle. Rising state taxes, fierce competition and the eye-watering cost of marketing online casinos all eat into margins, leaving less to drop to the bottom line than the topline growth suggests. A bad run of sporting results can also blow a hole in quarterly numbers, since the books pay out when favourites win.

Valuation is part of the story as well. These stocks ran up hard on the promise of an ever-expanding US market, leaving them priced for years of flawless execution. When growth is already baked into the share price, any wobble, a tax hike here, a soft quarter there, a new rival there, can send the stock down sharply. Short sellers thrive on exactly that gap between sky-high expectations and messier reality, and 2026 has handed them plenty of it.

Prediction Markets Add to the Worry

There is a newer threat in the mix too. The rapid rise of prediction-market platforms such as Kalshi and Polymarket gives bettors a cheaper, nationally available alternative to the licensed apps. If those venues keep grabbing share of the betting dollar, the established sportsbooks could face a squeeze they did not have to worry about a year ago, and short sellers have noticed. The platforms operate in all 50 states, which means they can reach customers the regulated books legally cannot.

State Taxes Bite

The policy backdrop is not helping the bulls. A run of states has raised sportsbook taxes in 2026, North Carolina among them, lifting operator costs just as the companies try to prove they can be reliably profitable. Every percentage point a state adds is a percentage point the operators must claw back through tighter promotions or accept as lost margin. Illinois and Ohio have already shown that once a state raises its rate, others tend to follow.

The Bull Counterpoint

The other side of the trade is straightforward. The 2026 World Cup is driving the largest betting surge the US has ever seen, and a strong run of results could force shorts to cover and send the stocks higher. Operators also point to the lifetime value of customers who use both sportsbook and casino products, a cross-sell that improves the economics over time. Several have promised investors that 2026 is the year the profits finally arrive at scale. The bull case is real, which is what makes the standoff interesting.

What It Means

The $2.3 billion short profit is a useful reality check against the World Cup hype. Betting volumes are surging, but turning that activity into steady profit in a higher-tax, more competitive market is the test the sector still has to pass. The next couple of earnings seasons, with the tournament numbers baked in, will show which side of this trade reads the industry right. For now, the smart money is split. A blockbuster World Cup could trigger a sharp rebound and burn the shorts, while a soft quarter or another tax hike would prove their thesis. Few corners of the market offer a cleaner test of whether the gambling boom is a real business or just a good story.