DraftKings (DKNG) stock fell 6% to $22 as a proposed Senate bill would restrict prediction market platforms that directly threaten its DraftKings Predictions product, a key growth driver generating 42.8% revenue growth in Q4 2025.
Penn Entertainment (PENN) stock remained essentially flat due to minimal exposure to prediction markets and solid online sportsbook momentum with 73% year-over-year growth in Q4 2025.
A bipartisan Senate bill targeting sports betting on prediction market platforms poses direct regulatory risk to DraftKings’ federally regulated CFTC-overseen Predictions product, while competitors with traditional sportsbook models like Penn Entertainment face less legislative exposure.
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DraftKings (NASDAQ:DKNG) stock is down 6% in Wednesday trading, falling from $23.30 to around $22, while Penn Entertainment (NASDAQ:PENN) stock is essentially flat. Same sector, same legislative headline, two very different reactions. The dividing line is a proposed bipartisan Senate bill targeting sports betting on prediction market platforms.
The bill, if passed, would impose strict new restrictions on event contracts used for sports wagering outcomes. That puts DraftKings Predictions directly in the crosshairs.
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DraftKings Predictions is a federally regulated event contracts product operating under CFTC oversight, and it represents one of the company’s most ambitious growth bets heading into 2026. Penn Entertainment, by contrast, has limited exposure to prediction market platforms, which is exactly why PENN stock is holding its ground while DKNG stock takes the hit.
This reversal comes just two days after both stocks climbed on macro tailwinds, with the sector looking like it might be turning a corner. Wednesday’s selloff is a reminder of how quickly federal regulatory risk can reset the narrative for a pure-play online betting operator.
DraftKings is the only U.S.-based vertically integrated sports betting operator, and management has made no secret of how much it is counting on Predictions. CEO Jason Robins called it a “massive, incremental opportunity” on the Q4 2025 earnings call and committed to deploying significant growth capital to build out the product. That growth capital assumption is now sitting under a legislative cloud.
The company entered 2026 with strong fundamentals. DraftKings posted fourth-quarter 2025 revenue of $1.99 billion, up 42.8% year-over-year, and achieved its first-ever full-year GAAP net income of $3.71 million. Full-year 2026 revenue guidance sits at $6.5 billion to $6.9 billion. That’s all well and good, but a meaningful piece of the growth story is now a legislative question mark.
DKNG stock was already down 32% year-to-date and 42% over the past year. Today’s 6% drop adds another layer of pressure to a stock that has struggled to hold gains even when the underlying business is performing well.
Penn Entertainment’s business model looks very different from DraftKings right now, and that difference is exactly why PENN stock is sitting flat while DKNG stock sells off. Penn Entertainment operates a diversified portfolio of regional casinos across 28 jurisdictions, with its Interactive segment anchored in traditional online sportsbook and iCasino operations under the theScore Bet and Hollywood iCasino brands. The company’s prediction-market exposure is minimal.
Moreover, the company’s Interactive segment is showing genuine momentum. Penn Entertainment’s online sportsbook revenue grew 73% year-over-year in Q4 2025, and the company achieved positive adjusted EBITDA in December, a meaningful operational milestone after years of losses in that segment. CEO Jay Snowden described the quarter as driven by “the continued growth of our standalone Hollywood iCasino product and increased cross-sell, as well as improvements in our online sportsbook product offering and operations.”
Penn Entertainment also authorized a $750 million share buyback program beginning January 1, signaling management confidence in the business at current prices. With PENN shares trading near $14.46, the buyback provides a floor that pure legislative risk cannot easily knock out.
There is a genuine bullish argument buried in today’s selloff. If the proposed Senate bill restricts prediction market platforms from competing in sports wagering, it could reduce competitive pressure on licensed sportsbooks like DraftKings.
Fewer competitors eating into handle volume is, in theory, good for the incumbents. That argument holds if Congress acts decisively and DraftKings’ core sportsbook business benefits more than its Predictions product loses.
The bear case is harder to dismiss right now. The community is actively debating insider selling activity at DraftKings, a shift in sentiment from just two days ago when $571.5 million in share repurchases during fiscal year 2025 was being cited as evidence of management confidence. Regulatory uncertainty layered on top of insider selling concerns, a stock down that’s 44% over the past year, and a growth product suddenly facing federal scrutiny is a difficult combination to argue through.
Analysts still see significant upside for DraftKings stock, with a consensus price target of around $36 and 28 buy ratings against 7 holds. On the other hand, price targets can get revised when legislative risk materializes. Analyst commentary over the next 48 hours will matter. So, watch DKNG closely because if the Senate bill gains traction, the prevailing price targets could move quickly.
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