Why the Kalshi fears in the sports betting sector may be overblown

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Amid a sharp drop in sports betting stocks on Tuesday, Texas Capital Securities analyst David Bain believes investors fears about prediction markets are vastly overstated.

Crucially, Bain said Kalshi volume may not be as large as the headlines because the $540 million tally was stated as a volume number, which refers to handle and could mean that Kalshi is counting both sides of the trade (buyer and seller of the contract). He also noted that Texas Capital anticipates the U.S.-only September regulated online sports market handle will top $17 billion, which would be considered a healthy tally.

In addition, Bain expects most gaming companies are likely to issue soothing comments to investors at the G2E Gaming Show in Las Vegas early next week. "We look at today’s stock weakness as a buying opportunity for many online-gaming-related stocks," advised Bain. Within all the buzz about prediction markets and online sports betting threats, Bain and his team see Genius Sports (GENI [https://seekingalpha.com/symbol/GENI]) as a clear winner because it benefits from market expansion of any kind.

Shares of DraftKings (DKNG [https://seekingalpha.com/symbol/DKNG]) were down 11.2% at 1:45 p.m., while Flutter Entertainment (FLUT [https://seekingalpha.com/symbol/FLUT]) shed 10.6% and MGM Resorts (MGM [https://seekingalpha.com/symbol/MGM]) was down 5.4%. Elsewhere, Rush Street Interactive (RSI [https://seekingalpha.com/symbol/RSI]) sank 9.7%, Genius Sports (GENI [https://seekingalpha.com/symbol/GENI]) was down 7.9% at last check, and Sportradar (SRAD [https://seekingalpha.com/symbol/SRAD]) was off 6.9%. The Roundhill Sports Betting & iGaming ETF (NYSEARCA:BETZ [https://seekingalpha.com/symbol/BETZ]) was down 3.9%.

MORE ON THE SPORTS BETTING SECTOR

* DraftKings and Flutter slide after Kalshi stuns the sports betting sector with huge trading volume [https://seekingalpha.com/news/4500235-draftkings-and-flutter-slide-after-kalshi-stuns-the-sports-betting-sector-with-huge-trading-volume]
* Will the rise of prediction markets push Texas and California to finally legalize sports betting? [https://seekingalpha.com/news/4499619-will-the-rise-of-prediction-markets-push-texas-and-california-to-finally-legalize-sports-betting]
* Seeking Alpha’s Quant Rating on Roundhill Sports Betting & iGaming ETF [https://seekingalpha.com/symbol/BETZ/ratings/quant-ratings]
* Dividend scorecard for Roundhill Sports Betting & iGaming ETF [https://seekingalpha.com/symbol/BETZ/dividends/scorecard]