Sports betting data companies could cash in from the prediction markets boom, despite recent investor jitters about the sector. That’s the view from Citizens Equity Research analyst Jordan Bender, who reckons firms like Genius Sports are playing a clever game here.

Bender met with Genius Sports executives last week and came away convinced the company’s got the right approach. Rather than fighting prediction markets or pretending they don’t exist, Genius is leaning into the opportunity.

Smart move, if you ask me.

Following the Money

Genius Sports has been pumping resources into prediction markets investments for a while now. CEO Mark Locke recently pointed to advertising opportunities in the space as a major growth driver. When a data company starts talking about ad revenue in a new vertical, you know they’ve spotted something worth chasing.

The really interesting bit is how the major operators are approaching this. DraftKings, FanDuel, and Fanatics have launched prediction market platforms without facing serious pushback. That tells you everything about where everyone involved thinks this is heading.

These platforms aren’t going anywhere.

NFL Warming Up

Even the NFL is changing its tune. Smaller leagues jumped on prediction markets quickly, but the NFL held back. Not surprising, given how protective they are of their brand. But Jeff Miller, the league’s EVP, has recently signalled more openness to the concept after being firmly against it last year.

If the NFL allows prediction market companies to use league IP, that’s a major unlock for data providers. Bender notes Genius Sports could generate additional revenue beyond its 2028 targets, despite currently projecting minimal income from this sector.

The upside potential is substantial.

Hedged Position

Here’s the clever part of Genius Sports’ strategy. Even if sports-related prediction markets got banned tomorrow, the company’s financial outlook wouldn’t change. They’re not banking on this revenue in their projections, so it’s pure upside if it materializes.

That’s proper risk management. Build the capability, position for the opportunity, but don’t bet the farm on it.

If prediction markets take off, Genius wins. If they get restricted or banned, Genius carries on as normal. Either way, they’re covered.

The investment community was spooked by prediction markets initially, thinking they’d cannibalize traditional sports betting and hurt data providers. Bender’s analysis suggests the opposite. Data companies that adapt quickly will find new revenue streams in a growing market.

Those that don’t will watch from the sidelines.