Shares of DraftKings tumbled 8.5% on Monday after New York politicians sounded much more pessimistic about the prospects of online sports betting passing in the state, Deutsche Bank (DB -0.31%) analyst Carlo Santarelli told investors in a research note.
New York could be the sports-betting prize in the country because of the potential market size and because it's home to some of the largest, most lucrative storied franchises in all of sports. While politicians once sounded fairly optimistic about the prospects for legalizing sports betting, their outlook has now soured.
Sounding much less optimistic than he did several weeks ago, State Senator Joe Addabbo Jr. told Legal Sports Report today it was frustrating getting mobile betting included in budget negotiations. And getting it included was critical since there was "very little hope that we would do gaming issues post-budget because what's the incentive?" Addabbo said.
Santarelli held similar doubts and said the initiative was "hanging by a thread."
While opening up New York would be a bonanza for a growth stock like DraftKings, it's not the dour situation the drop in its stock suggests. Next door, New Jersey has legal online sports betting, and it's estimated that 25% of the bets made in the state come from New Yorkers crossing the border.
DraftKings is still able to tap a good portion of New York's potential, though obviously it would be much bigger if sports betting were legal there.