NextFin News - Michael Burry has taken a direct position in DraftKings and Flutter Entertainment, betting that regulated sportsbooks will outlast prediction markets that have drawn customers with lighter rules and lower friction. The thesis is simple: if regulators tighten event-contract trading, the pressure on sportsbook valuations could ease, and the recent markdown in two of the industry’s biggest names may prove excessive.
Burry said on Wednesday that he bought a full-sized position split roughly 60% in Flutter and 40% in DraftKings, paying about $107 a share for Flutter and the low $26 range for DraftKings. He said he could eventually increase each holding into a full standalone position. In recent trading, DraftKings changed hands at $27.17, up 0.97%, with a market capitalization of $13.48 billion, while Flutter traded at $111.32, up 2.74%, with a market capitalization of $19.31 billion.
The trade lands after a sharp reset in sentiment. DraftKings has fallen about 45% from its 52-week high reached last September, while Flutter has slid 65% from its August peak. Those declines show the market is no longer valuing these companies as simple growth stories. It is pricing them as businesses whose economics could be reshaped by a regulatory fight over who gets to offer sports-linked contracts and on what terms.
“I believe that the political climate will not tolerate this,” Burry said in a Substack post Wednesday. “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 also described the two stocks as operating businesses with room to improve. He said DraftKings is inflecting as an operating business and that the value lies in the transition he expects in the near future. He said Flutter has been hurt by capital misallocation in the past, but remains a fundamentally very good operating business with terrific scale.
Why DraftKings and Flutter Are The Right Vehicles
Sports betting is a regulatory business as much as a consumer one. DraftKings and Flutter win by operating inside state-by-state rules, tax regimes and compliance burdens that shape pricing and profitability. Their edge comes from scale, brand recognition and the ability to spread customer-acquisition costs across a large base.
Prediction markets challenge that setup by offering event-based contracts under a different legal theory. The U.S. Commodity Futures Trading Commission says it has jurisdiction over those contracts, and the agency is involved in legal disputes with states over who can regulate them. That structure gives prediction markets a different cost base and a different route to consumers.
For investors, the key question is whether that advantage lasts. Burry’s answer is no. He sees the current regime as an exception rather than a stable end state, and he is betting that the legal and tax framework will eventually move closer to the one that governs sportsbooks. If that happens, the edge from operating in a loophole fades, and regulated books regain some of the certainty the market has discounted away.
The argument also fits the valuation reset. DraftKings’ trailing revenue was 6.29 billion dollars, and its trailing price-to-sales ratio was 2.06. Flutter’s trailing revenue was 17.02 billion dollars, and its trailing price-to-sales ratio was 1.11. Those multiples suggest investors are demanding proof of durable profitability and regulatory stability before awarding richer valuations.
What The Market Is Pricing In
The recent share prices show the market is still reassessing the sector. DraftKings’ 52-week range runs from 20.46 to 48.78, while Flutter’s spans 91.52 to 313.68. Those ranges show that the industry has not settled into a stable narrative.
In that context, Burry’s bet is less about calling a bottom in the stocks than about calling a bottom in the assumption that prediction markets will keep expanding indefinitely under a looser framework. If he is right, the market has been penalizing DraftKings and Flutter for a competitive threat that may ultimately be capped by law and taxation. If he is wrong, the stocks could remain under pressure as event-contract platforms continue to chip away at the same customer pool.
Either way, the market is looking at the rulebook, not just earnings. That is what makes the trade notable: it turns a sector stock pick into a view on the future of gambling regulation.
What Happens Next
The next catalysts are legal and regulatory. Any court ruling, enforcement action or state-level move that narrows the room for prediction markets would strengthen Burry’s thesis. Any sign that event-contract platforms are becoming more accepted would argue for a longer period of pressure on sportsbook valuations.
Investors will also watch whether DraftKings and Flutter can keep improving execution. The stronger the operating performance, the easier it becomes to argue that the stocks were weighed down by an exaggerated fear of competition. The weaker the margin progress, the more the market will keep treating regulatory uncertainty as a reason to discount the sector.
The debate is not whether prediction markets can grow. It is whether they can keep growing while staying outside the tax and regulatory framework that defines the rest of the industry.
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