Michael Burry buys Flutter, DraftKings shares betting prediction-market threat will fade

Michael Burry bought Flutter at about $107/share and DraftKings in the low $26s, building a position roughly 60/40 toward Flutter, arguing regulation and taxation will eventually curb the main risk from prediction markets. He expects political pressure to bring prediction markets under tighter oversight, while noting Flutter is down ~50% YTD and DraftKings down ~21% as he sees operating/business inflection potential. Burry also added to JD.com at $27.58 and expects HK/China stocks to benefit as AI/memory-chip enthusiasm unwinds in South Korea and Japan.

Analysis

The market is likely underestimating how quickly prediction markets can pressure sportsbook economics even without stealing the majority of handle. The first-order hit is not volume, it is customer-quality mix: event-contract platforms can siphon off the sharpest, most price-sensitive users, forcing bookmakers to spend more on promos and accept lower hold to defend share. That makes DKNG more fragile than FLUT because DKNG has more direct U.S. beta, while FLUT’s scale and international diversification give it a better chance to absorb a higher-acquisition-cost environment.

The key timing issue is that regulation moves slower than product adoption. Over the next 1-3 months, the stock reaction is mostly sentiment and headline risk; over 6-18 months, state tax policy, CFTC enforcement, and litigation determine whether prediction markets remain a niche or become a structural margin cap on the sector. If regulators fail to act quickly, the multiple on U.S. online gaming should compress as investors price in a permanently lower take-rate, while any aggressive enforcement would disproportionately help the traditional books.

Burry’s JD.com buy reads more like a rotation signal than a clean bottom-up catalyst. If capital rotates out of crowded AI/memory winners in Korea and Japan, China/HK value names with cash flow and buybacks could rerate, but that trade is still hostage to policy credibility and growth stabilization. The contrarian point on the gaming names is that the market may be over-penalizing FLUT for a threat that mostly hits a narrower slice of users; the more vulnerable name is DKNG, where the margin structure has less cushion if promo intensity rises.

Key Decisions for Investors

• Long FLUT / short DKNG, 3-6 month horizon, beta-adjusted: express relative resilience to prediction-market cannibalization and higher promo spend; thesis is invalidated if DKNG maintains revenue growth and promo ratios stay stable through the next two earnings prints.
• If we want optionality on regulatory upside, buy FLUT call spreads 6-9 months out on weakness rather than chase the stock; the payoff is best if court/agency action forces prediction markets back under state-taxed regimes, with defined downside if enforcement stays muddled.
• Stay neutral on JD for now; make it a watch item only. Enter a JD / EWJ or JD / EWY relative-long only if China/HK breadth improves while Korea/Japan semiconductor multiples continue to de-rate, otherwise this is a flow trade without a hard catalyst.
• Use any post-headline rally in DKNG to reduce exposure into earnings rather than add; the risk/reward worsens if management has to defend share with higher promos before any legal clarity arrives.