DraftKings and Flutter Entertainment, two major players in the sports betting and online gambling industry, experienced setbacks on Wednesday due to various developments in the sector. DraftKings' stock took a dive after reaching a new high, while Flutter Entertainment's stock tumbled amidst increased federal scrutiny.

In a move to protect student athletes and maintain the integrity of college sports, the National Collegiate Athletic Association (NCAA) announced on Wednesday its intention to ban proposition bets (prop bets) related to college sports. NCAA President Charlie Baker emphasized the need for further action to address the prevailing issues in the country, stating that many states are responding by prohibiting college prop bets. Prop bets are wagers that focus on specific aspects of a game rather than its final outcome, such as the number of points or rebounds a basketball player may achieve or the yards or touchdowns a football player may score.

The NBA also found itself embroiled in potential betting irregularities, as the league is currently investigating Jontay Porter, a player for the Toronto Raptors, regarding multiple instances of such irregularities. The investigation is particularly centered around prop bets. Furthermore, the Wall Street Journal reported that online gambling VIP programs are now under federal scrutiny, signaling increased attention on the industry.

These developments follow a recent scandal involving Shohei Ohtani, one of Major League Baseball's biggest stars. The Los Angeles Dodgers slugger's name surfaced in a federal investigation into illegal sports gambling, which alleged that millions of dollars were transferred from Ohtani's bank account to an illicit bookmaker. Adding to the complexity of the situation, Ohtani claimed in a press conference that his interpreter had stolen the money to pay the bookmaker, leaving many questioning how such a large theft could have gone unnoticed for an extended period.

As a result of these challenges and the heightened scrutiny on the industry, DraftKings and Flutter Entertainment saw a decline in their stock prices. DraftKings' shares fell by 6.8% to $45.35, retreating from their 52-week high, while Flutter Entertainment's stock tumbled 5.9%, dropping below the 50-day moving average.

The repercussions of the federal investigation into gambling addiction have also started to emerge. Lawmakers, including Senator Richard Blumenthal, have sent letters to several online gambling companies, such as Flutter Entertainment and DraftKings, urging them to discontinue the use of player data and marketing techniques that target individuals with gambling problems. Additionally, Representative Paul Tonko is reportedly working on legislation that would establish federal oversight of online sports betting in states where the business has been legalized.

The online betting industry as a whole could face potential shifts and increased regulation as lawmakers and regulators strive to address concerns related to gambling addiction and ensure fair practices within the domain. Other publicly traded gambling companies, including Boyd Gaming, Caesars Entertainment, MGM Resorts, Penn Entertainment, and Wynn Resorts, experienced minor fluctuations in their stocks but largely remained stable on Wednesday.

As the sports betting and online gambling landscape continues to evolve, industry stakeholders will need to navigate potential regulatory challenges while ensuring responsible gambling practices to safeguard customers and maintain the integrity of the games.