Michael Burry, the investor whose bet against the US housing market inspired The Big Short, has bought shares in Flutter Entertainment and DraftKings, backing the two sportsbooks to withstand the threat from prediction markets.
Writing on his Substack, Burry said he sees America’s two largest sportsbook operators as strong businesses whose share prices have been pushed down by the fast growth of prediction markets. He took a full-sized position split roughly 60% in Flutter and 40% in DraftKings, buying Flutter at about $107 a share and DraftKings in the low $26 range. He said he could later raise each holding into a full standalone position.
Why Burry expects regulation to catch up
Burry’s case rests on the view that prediction markets will not keep growing outside the tax and regulatory rules that apply to licensed sportsbooks. Kalshi lost a legal round in New York this week when a judge ruled its sports markets should not be exempt from state gambling laws.
New York takes 51% of FanDuel’s and DraftKings’ sports-betting revenue in tax. Burry expects platforms such as Kalshi and Polymarket to face similar charges before long.
“I believe that the political climate will not tolerate this. Prediction markets exist in a loophole adjacent to a heavily regulated and taxed industry. In time, prediction markets will be subsumed into regulation and taxation,” Burry wrote.
States move to tax prediction markets
Some states have already tried. Illinois and Kentucky have each approved rules that would take just under 15% of the revenue platforms generate from wagers. Both measures are being challenged by Kalshi and the Commodity Futures Trading Commission (CFTC).
President Donald Trump has backed the platforms and labelled Illinois Governor JB Pritzker “SCUM” over his attempt to regulate the sector. Legal experts say the CFTC’s involvement, with Trump’s support, could produce favourable outcomes for prediction markets when the question reaches the Supreme Court, which is now widely expected.
Law professor Melinda Roth said this week that a Supreme Court case could come as soon as October. New Jersey is appealing the Third Circuit’s ruling in favour of Kalshi, while cases in Arizona and Nevada have been appealed to the Ninth Circuit. Whatever the courts decide, Burry expects prediction markets to lose the light-touch conditions that have driven their expansion.
Flutter and DraftKings shares under pressure
Burry bought Flutter at an average of around $107 a share. A year ago the stock traded near $307. Higher betting taxes in the UK and the rise of US prediction markets have both weighed on the price. During the decline, Flutter replaced FanDuel’s chief executive and made cuts to its American workforce as part of a restructuring.
DraftKings has fallen from $47.8 a year ago to around $26, the level at which Burry bought in on Wednesday. Chief executive Jason Robins has been vocal about the company’s prospects in prediction markets.
“This is the most bullish I have ever felt about the future of DraftKings. We will pursue this opportunity, we will compete, and we will win,” Robins said last year.
DraftKings has added prediction markets across its product range and is building a standalone platform. FanDuel has said less about its plans but is also targeting the segment under new chief executive Christian Genetski, following Flutter’s wider corporate reset.
Burry’s position works either way. If the courts and legislatures tax and regulate the platforms, the sportsbooks keep their advantage. If the markets are left unchecked, DraftKings and FanDuel are building to compete in them. The next move belongs to the Supreme Court.
Source: Michael Burry
