Prediction markets are gaining traction as the next big thing for online gambling, with Robinhood and Kalshi reporting a surge in wagers. This has led to a drop in shares of betting operators like DraftKings and Flutter Entertainment, prompting analysts to slash price targets and ratings.

The rise of prediction-based betting venues poses a challenge to the gambling industry, with Kalshi and Polymarket attracting interest ahead of the 2024 presidential election. These markets are now offering complex parlays, expanding their sports-betting operations and setting new volume records.

President Trump’s tax cuts provide an incentive for gamblers to shift to prediction markets, where wagers are treated like financial contracts. However, obstacles remain, with some states claiming Kalshi violates gambling laws. FanDuel is countering the threat by offering its own contracts later this year.

Despite the rise of prediction markets, brokerage analysts still have buy ratings on DraftKings and Flutter, advising investors to buy any dips in the stock. However, the rapid growth of prediction markets has rattled confidence in the incumbent companies, leading to downgrades and short positions from analysts and investment firms.

Read more at Yahoo Finance: Sports-betting stocks face growing threat from prediction rivals