Michael Burry bets on sportsbooks DraftKings, Flutter

Michael Burry, the investor famous for predicting the U.S. housing crash in 2008 and portrayed in the movie “The Big Short,” recently revealed that he has taken significant positions in regulated sports-betting operators DraftKings and Flutter Entertainment. Burry believes that the rapid expansion of prediction markets will eventually lead to regulatory crackdowns, driving down the stocks of these companies and presenting a buying opportunity.

Burry disclosed that he has purchased a full-sized position split between Flutter and DraftKings, with Flutter accounting for about 60% of the investment and DraftKings making up the remaining 40%. He acquired Flutter shares at around $107 each and DraftKings shares in the low $26 range, indicating his confidence in the potential upside for both companies.

The rise of prediction markets, which offer event-based contracts, has caught the attention of regulators like the U.S. Commodity Futures Trading Commission. These contracts have managed to operate in a regulatory gray area, avoiding state gaming taxes and oversight. However, Burry believes that this loophole will not last, as prediction markets will eventually be subject to regulation and taxation.

Both DraftKings and Flutter have seen their stock prices decline significantly from their recent highs, providing an attractive entry point for investors like Burry. He sees DraftKings as poised for a turnaround in its operating performance, while Flutter is viewed as a strong business with robust scalability despite past capital allocation issues.

In a strategic move, both companies have started exploring their own prediction-market offerings, positioning themselves to adapt to changing regulatory environments. This proactive approach could help them navigate potential regulatory challenges and capitalize on opportunities in the evolving landscape of online betting and prediction markets.

Overall, Burry’s investment in DraftKings and Flutter reflects his contrarian approach to investing and his belief in the long-term potential of these companies. As the regulatory landscape for prediction markets continues to evolve, these investments could prove to be astute plays for investors looking to capitalize on the intersection of sports betting, online gaming, and financial markets.