Burry Takes Stakes in DraftKings, Flutter on Regulatory Loophole Thesis
Famed investor Michael Burry has acquired shares of online sportsbooks DraftKings and Flutter Entertainment, betting that state governments will close a regulatory loophole currently benefiting prediction market rivals.
Investor Michael Burry has purchased shares of online sportsbook operators DraftKings and Flutter Entertainment, wagering that a regulatory crackdown on prediction markets will revive the beaten-down sector.
Burry acquired DraftKings at roughly $26 per share and Flutter at approximately $107 per share. Shares currently trade near those entry points, with DraftKings at $26.48 and Flutter at $110.84. The portfolio is weighted 40% toward DraftKings and 60% toward Flutter, a skew likely driven by Flutter's steeper year-to-date drop of nearly 50% compared to DraftKings' 20% decline, as well as Flutter's superior ability to convert wagers into revenue.
The primary headwind for traditional sportsbooks has been the rapid rise of prediction platforms like Kalshi and Polymarket. Unlike sportsbooks, which are restricted to 30 states and subject to steep state taxes, prediction markets operate as "event contracts" under the purview of the U.S. Commodity Futures Trading Commission. This federal framework effectively grants prediction markets access to almost all 50 states while sidestepping the state-level tax burdens that weigh heavily on DraftKings and Flutter.
Burry argues this structural advantage is unsustainable for state coffers. “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,” he said. State tax data supports the fiscal stakes: revenue from sports betting surged 382% from $190 million in the third quarter of 2021 to $917 million in the second quarter of 2025. If prediction markets siphon this volume, states stand to lose a rapidly growing revenue stream.
Wall Street broadly agrees the market has overcorrected. Despite DraftKings trading at a steep price-to-earnings ratio of 441.33, analysts maintain a consensus price target of $34.30, implying roughly 30% upside. Out of 40 ratings, 30 are Buys. The upside is even starker for Flutter, where a consensus target of $178.83 suggests roughly 60% potential gains, supported by 18 Buys out of 29 total ratings.
Even if Burry's regulatory thesis fails to materialize, the traditional operators have built a hedge. Both DraftKings and Flutter have rolled out their own prediction market offerings. This diversification means they can participate in the growth of event contracts regardless of the regulatory outcome, whereas pure-play prediction platforms lack a traditional sportsbook to fall back on if a crackdown occurs.
