DraftKings short sellers were already covering before Monday's catalyst hit. DKNG short interest peaked at 38.5 million shares in early February, then fell nearly 6 million shares in under six weeks, ahead of Monday’s WSJ report.

The regulatory headline shifts a key bears thesis. A proposed bill banning Kalshi and Polymarket from sports betting could eliminate a key bear argument against DraftKings. Shorts that hadn't covered were caught offside, but YTD shorts are up $400M in mark-tomarket P&L.

The remaining short position carries limited squeeze potential. S3's Crowded score has been declining since the start of the year, and the Short Squeeze score sits at just 20 — signaling a relatively low level of squeeze risk.

DraftKings short sellers spent late February cutting exposure — ahead of regulatory news.

DraftKings short interest peaked at approximately 38.5 million shares in early February before a sustained retreat took hold. By mid-March, the position had fallen nearly 6 million shares, bringing DKNG to 6.8% of float short —its lowest level since October 2025 and lowest notional short exposure since December 2024. Monday's Wall Street Journal report on a proposed bipartisan bill targeting Kalshi and Polymarket may accelerate the short-covering trend that has been underway since the start of 2026. The legislation would bar prediction-market platforms from offering sports bets —removing a central bear thesis against DraftKings. Shares closed up roughly 1% on the news, but S3's Short Squeeze score sits at just 20, suggesting the remaining position is unlikely to produce an explosive, self-reinforcing squeeze.

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