Renowned investor Michael Burry announced on Friday that he has increased his recently established long position in DraftKings (NASDAQ: DKNG), one of the top online sportsbook operators in the U.S.
In an extensive Substack article, Burry revealed that he has purchased more shares of DraftKings in the vicinity of $25. The stock ended the trading day at $24.94 on Friday. Since July 8, when he first disclosed his investment in DraftKings around $26 and in FanDuel parent company Flutter Entertainment (NYSE: FLUT) at approximately $107, the stock has seen a downward trend. Flutter finished at $106.56 yesterday.
It appears that the investor known for “The Big Short” did not increase his position in Flutter. As for DraftKings, despite recent underperformance, Burry stated that his “core thesis remains intact.”
Burry mentioned that he intends to delve deeper into analyses of these two gaming stocks in the upcoming weeks. Notably, DraftKings and FanDuel lead the online sportsbook market in the U.S.
Analyzing Burry’s Bets on Gaming Stocks
The consistent thesis on DraftKings that Burry referred to is straightforward. Firstly, he anticipates that DraftKings will develop into a more operationally efficient company. Secondly, he acknowledges the challenges faced by FanDuel but maintains that Flutter is a fundamentally robust operator.
Additionally, his optimistic outlook on these two sports betting giants stems from the belief that regulatory actions may impact prediction markets in the future. Burry initially highlighted that prediction markets are currently operating within a “loophole economy” where states are still navigating regulatory and tax concerns.
Burry is betting that this scenario won’t last indefinitely. Should regulatory agencies tighten their grip on operators in the prediction market, companies like DraftKings and FanDuel could potentially gain an advantage.
He suspects that the prevailing political environment suggests an imminent regulatory push for prediction markets, where states might begin to demand taxation revenues similar to what’s done with sports betting.
Potential Supreme Court Impact on Burry’s Investments
Looking ahead, the Supreme Court could act as a driving force for a rebound in sports betting stocks. Several states are preparing for that legal battle.
This hypothesis is grounded in the fact that numerous states are engaging in lawsuits against yes/no exchanges. While states generally hold a favorable record against these firms, there have been instances of prediction markets securing victories. Given this variability, some legal analysts predict that the Supreme Court may take up a case involving prediction markets, although a decision may not come until next year or even 2028.
At this stage, it remains speculative; however, if prediction markets are eventually compelled to move away from sports derivatives, it would benefit both DraftKings and FanDuel—as well as Burry.