Key Takeaways:
Michael Burry disclosed new stakes in DraftKings and Flutter Entertainment, betting that regulators will rein in prediction markets that have weighed on the stocks.
"DraftKings is inflecting as an operating business and the value is in the transition I foresee in the near future," Burry, founder of Scion Asset Management, said in a Substack post Wednesday. "Flutter has been hurt by capital misallocation in the past, but is a fundamentally very good operating business with terrific scale."
Burry 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. DraftKings shares had fallen about 45% from their 52-week high reached last September, while Flutter had slid 65% from its August peak.
The bet is a structural wager on business maturation rather than a speculative play on sports outcomes. Burry argued that prediction markets, which have sidestepped state gaming taxes, will eventually face the same regulatory and tax burdens as traditional sportsbooks.
"Prediction markets exist in a loophole adjacent to a heavily regulated and taxed industry," Burry wrote. "In time, prediction markets will be subsumed into regulation and taxation."
The U.S. Commodity Futures Trading Commission is currently engaged in legal action against multiple states over who can regulate event-based contracts. The CFTC asserts that many event contracts fall under its jurisdiction, a position that has created uncertainty for platforms offering political and sports-adjacent wagering.
Both DraftKings and Flutter have begun exploring their own prediction-market offerings, potentially positioning themselves to benefit regardless of how regulators act, Burry noted. The move would allow the regulated operators to capture demand that has flowed to unregulated competitors.
Shares of DraftKings rose 1.5% to $27.31 on Wednesday, while Flutter gained 3% to $111.57. Burry also disclosed he added to his existing position in Chinese e-commerce giant JD.com.
The disclosure shows that one of the most closely watched contrarian investors sees value in regulated gaming operators after a prolonged selloff. Investors will watch for further SEC filings detailing the exact size of the positions, which Burry said he could eventually increase into full standalone holdings.
This article is for informational purposes only and does not constitute investment advice.
