Short sellers have pocketed a windfall of $1.3 billion this year betting against Hims & Hers Health Inc., as the telehealth company faces mounting legal challenges. The stock's steep decline has created a profitable opportunity for investors who wagered on further losses, according to market data.

The company's troubles stem from growing scrutiny over its business practices and regulatory compliance. Short interest has surged as traders anticipate continued pressure on the stock price, driven by ongoing legal proceedings and potential regulatory actions that could impact the company's operations and financial performance.

This development highlights the risks facing digital health companies operating in a rapidly evolving regulatory environment. The substantial gains for short sellers underscore the market's skepticism about Hims & Hers' ability to navigate these challenges, with the company's valuation taking a significant hit as investors reassess its growth prospects amid legal uncertainties.