(Bloomberg) -- DraftKings Inc. shares tumbled on Wednesday after NCAA President Charlie Baker announced he is pushing to ban college proposition betting, a popular type of side wager that allows gamblers to bet on an event or statistical outcome that’s not directly tied to the final result of a game. 

The company’s stock closed down 6.8% after slumping as much as 8.8%, leading mobile sports betting peers including FanDuel parent Flutter Entertainment PLC and MGM Resorts International lower. Baker announced that the National Collegiate Athletic Association is working with state legislators to remove college prop bets across the country, saying the organization is “drawing the line on sports betting to protect student-athletes and to protect the integrity of the game.” 

The announcement came as the Wall Street Journal reported that federal lawmakers are seeking more oversight on gambling companies, urging them to stop using player data and other marketing tactics to target customers with gambling problems.

DraftKings didn’t comment on the share price decline and instead referred questions to the American Gaming Association.

“Our industry looks forward to constructive dialogue with the NCAA, gaming regulators and other stakeholders to ensure robust legal sports betting markets with regulatory safeguards to protect consumers, athletes and game integrity,” AGA’s Senior Vice President, Government Relations Chris Cylke said in an emailed statement.

Sports betting has exploded in the US ever since the Supreme Court lifted a ban in 2018. Wall Street analysts have been positive on DraftKings as a leader within the nascent North America online gambling business given the prospects for new betting markets and growing popularity with fans. The stock has 29 buy recommendations, seven holds and one sell, according to data compiled by Bloomberg.

Yet, the industry has been plagued with signs that further regulation may be needed. In the last few weeks, Major League Baseball superstar Shohei Ohtani has been caught up in a gambling scandal, while the National Basketball Association is investigating one of its players due to alleged multiple instances of betting irregularities.

A ban on propositional betting in collegiate sports isn’t expected to have a material impact on DraftKings’ financial performance, according to Needham & Co analyst Bernie McTernan, who says that such wagers represented about 1.4% of the total amount of money put up in 2023.  

“We expect to see these types of headlines from time to time, but largely expect them to be forgotten,” McTernan wrote Wednesday in a note to clients.

DraftKings shares are still up about 29% year-to-date and closed Tuesday at a 52-week high.

(Updates with closing prices; adds comment from the American Gaming Association)

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