What happened

DraftKings (DKNG -2.81%) stock is down 7.5% as of 1:28 p.m. ET Wednesday in response to troubling election results in California. The state rejected proposals that would expand mobile and in-person sports betting.

So what

Legalized sports betting has been touted as a growth market ever since the U.S. Supreme Court struck down a ban of the business in 2018. But, perhaps the opportunity isn't quite as strong as initially suggested.

That's the takeaway from Tuesday's voting in California, anyway. Proposition 26 asked the state's voters if they wanted to add sports betting offerings in casinos and at horse racing tracks, while proposition 27 queried voters if they'd like to legalize online and mobile sports wagering within the state. A little more than 70% of voters voted against proposition 26, and over 80% of them rejecting proposition 27.

The decision doesn't immediately alter DraftKings' destiny; it wasn't yet operating a sports wagering business in the state anyway. But investors who believed the company would eventually be allowed to enter the enormous state are repricing the stock to reflect a new reality. That is, California isn't yet open to the idea of embracing sports wagering.

Now what

Tuesday's voting results aren't devastating to the company. Indeed, with or without California, most of the nation is still increasingly open to the idea of legalizing a variety of sports betting. Numbers from Legal Sports Report indicate that roughly half the United States' states as well as Washington, D.C. already allow some sort of sports wagering, with more on the way.

With the progressive state of California unwilling to legalize the business despite the tax revenue it potentially generates, however, the nation may not be as ready for DraftKings' product as once presumed.

There's no need for shareholders to sell the stock on this news, particularly given the likelihood of a quick bounce back from today's drubbing. But, it's a concerning development current and prospective shareholders will want to bear in mind. Other states may decide to follow California's lead.