Hedge funds have made an estimated $2.3 billion in paper profits so far this year as a result of a surge of short selling that targeted well-known betting stocks.

Bearish hedge funds have been targeting DraftKings (NASDAQ: DKNG), Entain Plc (OTC: GMVHY), and Flutter Entertainment (NYSE: FLUT), the owner of FanDuel, since the beginning of 2026. DraftKings and Coral owner Entain are both down over 30% so far this year, while Flutter shares have fallen by almost 56%, indicating that those negative wagers are paying off.

According to a recent Financial Times investigation, short sellers who shorted Flutter, DraftKings, and Entain made $2 billion, $351 million, and $35 million, respectively.

Although data shows that some of the positions have been covered, the hedge funds still retain those positions because that estimate is in paper profits. Hedge funds of all stripes are drawn to the short sportsbook stock trade.

"Several major hedge funds have increased bearish positions against Flutter during 2026, including DE Shaw, Two Sigma, AQR Capital Management, Marshall Wace and Balyasny Asset Management,” according to HedgeWeek. “Marshall Wace, Millennium Management and Capital Fund Management have also built notable short positions in Entain.”

According to Seeking Alpha statistics, there is comparatively little short interest in Entain, which owns half of BetMGM, whereas Flutter has 5.57%. Seeking Alpha reports that DraftKings' short interest rate is 7.27%.

Sportsbook Stock Short Selling by Well-Known Criminals

Investors are acquainted with the movie that began airing last year and explains why hedge funds and other pessimistic traders are targeting sportsbook stocks.

Prediction markets and an antagonistic UK regulatory framework are the main causes of the competitive threat. Since Entain and Flutter are two of the biggest operators in the UK, higher wagering taxes there are especially burdensome for them.

Because it only operates in North America, DraftKings avoids that issue. However, some experts feel that the emergence of platforms like Kalshi and Polymarket casts doubt on DraftKings and challenges the sports betting investment thesis.

While long-term investors have found sportsbook stocks to be risky this year, iGaming-focused companies have little prediction risks.

For instance, the shares of Super Group (NYSE: SGHC), which does not conduct business in the US, and Rush Street Interactive (NYSE: RSI), have increased 9.21% and 35.87%, respectively, so far this year.

Sportsbook Stock Shorting Risks

Because there is no upper limit on a stock's growth, short sellers run the potential of suffering limitless losses, making short selling an intrinsically dangerous activity. Professionals, of course, don't let things get that bad, but negative wagers on DraftKings, Entain, and Flutter have hazards.

Regarding Entain specifically, there is conjecture that MGM Resorts International (NYSE: MGM) may try again to purchase the business or acquire it from BetMGM. Entain shares would probably increase in either scenario, possibly compelling short sellers to cover.

Both DraftKings and Flutter have their own prediction market platforms, and if they demonstrate to investors that they are making headway in that area, the stocks may see some upside and short sellers may become uneasy.