Michael Burry, the contrarian investor made famous by The Big Short, has taken substantial positions in Flutter and DraftKings. He’s betting that America’s established sportsbooks will navigate the emerging prediction market threat and ultimately thrive under coming regulation.

His timing deserves a closer look. He’s buying into Flutter at around $107 per share and DraftKings in the low-$26 range. Both stocks have fallen significantly from their recent peaks. Flutter took a real hammering in particular: the stock sat near $307 just twelve months ago before regulatory pressures and prediction market expansion squeezed valuations right across the sector.

A Loophole About To Close

In a recent Substack post, Burry laid out his thesis clearly: prediction markets are operating in regulatory grey space, but that won’t last. He’s convinced that states and federal authorities will eventually bring these platforms under the same tax and licensing frameworks that govern traditional sportsbooks.

“I believe that the political climate will not tolerate this,” Burry wrote. “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.”

There’s real substance behind this view. Kalshi just suffered a legal setback in New York when a judge ruled its sports markets don’t qualify for exemption from state gambling laws. Illinois and Kentucky have already moved to tax prediction market revenue at roughly 15%. New York currently extracts 51% of sports betting revenue from operators like FanDuel and DraftKings. Do the maths.

Courts, Politics, And Regulatory Uncertainty

The legal landscape remains contested. The Commodity Futures Trading Commission is backing prediction markets, and President Trump has publicly criticized state regulation efforts. Multiple cases are winding through federal appeals courts, with Supreme Court review widely expected by October. Some legal experts believe Trump’s influence could favour prediction market operators if the matter reaches the high court.

Still, Burry’s argument carries weight: even if prediction markets avoid immediate federal restrictions, the pressure for revenue capture will eventually become politically irresistible. States are cash-strapped and have grown accustomed to taxing gaming activity heavily.

The Play

Burry’s split position, roughly 60% Flutter and 40% DraftKings, reflects confidence that both operators have the scale, expertise, and brand equity to compete effectively once prediction markets face taxation and regulation. Both companies are already moving into this space aggressively. DraftKings CEO Jason Robins has been bullish about competing in prediction markets, while Flutter’s new American leadership under Christian Genetski is positioning the business for growth across multiple betting verticals.

Flutter has also undertaken restructuring steps, including replacing FanDuel’s CEO and cutting costs. This suggests management is preparing for a leaner, more competitive environment. Whether that proves sufficient hinges heavily on regulatory outcomes and what consumers actually want from traditional sportsbooks versus prediction markets.

It’s not a straightforward bet against prediction markets. It’s a calculated wager that regulation will level the playing field, and that established operators will win market share when it does.