Michael Burry bets on sportsbooks DraftKings, Flutter

Michael Burry of “The Big Short” fame says he’s buying shares of regulated sports betting operators DraftKings And Flutter EntertainmentVisionary regulators will eventually crack down on prediction markets after competition from startups weighs on stocks.

Burry said Wednesday that he bought a full-size position of about 60% in Flutter and 40% in DraftKings, buying Flutter for about $107 per share and DraftKings for as little as $26. Eventually, he said, he could elevate each holding to a fully independent position.

The investor, who came to prominence for predicting the US housing crash in 2008, said both companies were attractive companies whose shares had weakened as prediction markets expanded rapidly.

These platforms increasingly offer event-driven contracts, which the U.S. Commodity Futures Trading Commission claims are under its jurisdiction. The federal agency is currently taking legal action against multiple states in a battle over who can regulate prediction markets. The conventions also managed to avoid the state’s gambling taxes.

“I believe the political climate will not tolerate this,” Burry said in a post on Substack on Wednesday. “Prediction markets exist in a vacuum adjacent to a heavily regulated and taxed industry. Over time, prediction markets will be brought under regulation and taxation.”

Shares of DraftKings are down nearly 45% from their 52-week high reached last September, while Flutter is down 65% from its August peak.

“DraftKings is changing as an operating business and value is in a transition that I foresee in the near future,” he wrote. “Flutter has suffered in the past due to misallocation of capital, but fundamentally it is a very well-run business with tremendous scale.”

Both companies I started to explore Burry noted their own prediction market offerings potentially position themselves to benefit regardless of how the regulatory environment evolves.