Michael Burry, the investor who inspired the movie The Big Short, has bought shares in Flutter and DraftKings, expressing confidence that the sportsbooks can overcome the threat of prediction markets.
On his Substack, Burry wrote that he sees America’s two leading sportsbooks as attractive businesses whose shares have been weighed down by the rapid expansion of prediction markets.
He purchased 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 eventually increase each holding into a full standalone position.
Regulation & Taxes Will Curb Prediction Market Growth
Kalshi suffered a legal setback in New York this week as a judge ruled that its sports markets should not be exempt from state gambling laws.
New York collects 51% of FanDuel’s and DraftKings’ sports-betting revenue in taxes. Burry believes it will not be long before companies such as Kalshi and Polymarket face these tax burdens.
“I believe that the political climate will not tolerate this,” Burry wrote. “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.”
States Eager to Start Taxing Prediction Markets
Some states have already tried to introduce taxes on prediction markets. Illinois and Kentucky have both approved new regulations that would take just under 15% of the revenue platforms generate from wagers.
The laws, however, are being challenged by Kalshi and the Commodity Futures Trading Commission (CFTC). President Donald Trump has also labeled Illinois Governor JB Pritzker as ‘SCUM’ for attempting to regulate the prediction market industry.
Legal experts believe the CFTC’s involvement, with Trump’s backing, could lead to favorable outcomes for prediction markets when the matter comes before the Supreme Court, as is now widely expected.
Law professor Melinda Roth told CasinoBeats this week that a Supreme Court case could come as soon as October. New Jersey is appealing the Third Circuit’s ruling in favor of Kalshi, while cases in Arizona and Nevada have been appealed to the Ninth Circuit.
Whatever the outcome in the courts, Burry believes prediction markets will not be able to continue growing exponentially with little regulation or taxes.
Flutter & DraftKings Stocks Crash
Burry bought Flutter stock at an average price of around $107 a share. A year ago, the price was around $307 per share.
Increased taxes in the UK, as well as the rise of prediction markets in the US, have contributed to the price crash. Amid the decline, the company has replaced FanDuel’s CEO and implemented mass layoffs to restructure its American business.
DraftKings’ price, meanwhile, has fallen from $47.8 last year to around $26, the price at which Burry bought shares on Wednesday.
CEO Jason Robins has been outspoken about the company’s prospects for success in the prediction market industry.
“This is the most bullish I have ever felt about the future of DraftKings,” he said last year. “We will pursue this opportunity, we will compete, and we will win,” he added.
The company has rapidly expanded its range of prediction markets as it launches its own standalone platform. FanDuel has been less vocal about its ambitions in the emerging industry, but it is also targeting expansion as part of its new direction under new CEO Christian Genetski.
In that sense, the Burrys’ gamble on the two companies is not necessarily a bet against prediction markets, as both DraftKings and FanDuel could thrive if the markets are allowed to continue relatively unchecked.
