Genius Sports (NYSE: GENI) CEO Mark Locke believes prediction markets will continue to play a significant role in the U.S. sports betting landscape. However, he anticipates changes in the current state of the industry. With its positioning, the data provider is poised to benefit from this evolution.
Genius, a major supplier of data to traditional sportsbooks, recently inked contract settlement deals with two top prediction market operators. This confirms that the company is benefiting from the expansion of yes/no exchanges in the sports-heavy domain. Locke points out that there’s more to the equation, with bettors and traders seeking to engage in betting and trading, operators vying for business acquisition, and market makers striving to provide liquidity.
“Genius Sports supplies all three. We provide official data, settlement and integrity services to the platforms,” wrote the Genius CEO in a message to investors. “We sell data and pricing to the market makers who provide liquidity on exchanges. And through Legend and our broader media platform we help operators acquire the customers they are competing for.”
Locke sees prediction markets as advantageous for Genius, as they create new demand channels for the company’s data and offer additional avenues to monetize the data provided to existing clients.
‘The Rules Will Change. The Demand Will Not.’
There is ongoing discourse about the competitive threat prediction markets pose to traditional sportsbooks and the regulatory landscape for sports event contracts. Locke believes that prediction markets are fueling new interest in sports trading/wagering, and this interest will persist over the long haul, even if changes occur in the current exchange structure.
“Demand can endure despite access limitations, declining activity, or customer shifts between products. The focus is on the underlying appetite for sports wagering and confidence in specific business models,” says the Genius CEO. “Genius stands to benefit from the former without needing to bet on the latter. If prediction-market customers move away, the activity could flow back to the sportsbooks we already serve.”
Regarding the potential involvement of the U.S. Supreme Court in a prediction market case, Locke suggests that a favorable ruling could leave various aspects like product regulations, taxes, and consumer protections open to discussion.
Should the landscape for sports derivatives offered by prediction markets undergo significant changes, Genius could see benefits. Witnessing the growing demand for prediction markets, more states may opt for regulated sports wagering to secure tax revenues.
PAPSA-Style ‘Land Grab’ Could Benefit Genius
Analysts draw parallels between the recent customer acquisition strategies in prediction markets and the post-PASPA dynamics in the sports betting realm, which could work in Genius’s favor.
“GENI is currently benefiting from PM customer acquisition activities, which we believe could mirror the 2018 repeal of PASPA that led to a customer acquisition ‘land grab’ by online sportsbooks,” says Texas Capital analyst David Bain. “It is worth noting that larger players working to acquire customers are extremely well-capitalized, in our view, and it is much harder to significantly change the market share dynamic after a market has matured. The framework has created a sweet spot for GENI’s Legend acquisition.”
Bain highlights Genius’s role in providing essential liquidity to market makers, with deals in place with around 20% of the market makers in its pipeline, totaling approximately 100 such entities.
***Disclosure*** Legend (mentioned in the third paragraph) is the parent company of Casino.org. Genius Sports recently acquired Legend.