Why Is Michael Burry Betting On Betting Stocks? And Should You Too?

The man who made hundreds of millions of dollars betting against the US housing market in 2008 has just made a very different kind of call. On July 8, 2026, Michael Burry, the physician-turned-fund-manager immortalized by The Big Short, disclosed on his paid Substack newsletter that he has taken a full-sized long position in DraftKings (DKNG) and Flutter Entertainment (FLUT), two companies that together control approximately 78% of the US online sports betting market. Both stocks are down roughly 66% from their respective all-time highs. Burry believes the market is making a serious mistake by pricing them as if their best days are behind them.

Let's break down what DraftKings and Flutter actually do, why both stocks have cratered, what Burry specifically found in these businesses, what Wall Street's top analysts think, and whether the math behind this trade holds up under scrutiny.

What Do DraftKings and Flutter Do, and How Do They Make Money?

Before anything else, it helps to understand these companies at a fundamental level. Both are online sports betting businesses. Beyond that, they are quite different in structure, scale, and geography.

DraftKings: America's Digital Sportsbook

DraftKings launched in 2012 as a daily fantasy sports platform, where users assembled virtual player rosters and competed for cash prizes based on real game statistics. Think of it as a competitive, money-on-the-line version of the fantasy cricket leagues many Indian offices run during IPL season, except the scoring is all automated and the stakes are real.

Today it has three main revenue streams. The first is online sports betting, where users bet on which team wins a match, who scores, what the final margin will be, and thousands of other outcomes. The second is iGaming, meaning online casino games like slots and blackjack played on your phone. The third is the original Daily Fantasy Sports product.

The business model is clean. Think of DraftKings as a digital platform that takes the role of the house. You deposit money, place your bet, and the platform settles outcomes. But DraftKings keeps a margin on every wager placed, called the "hold rate," which typically runs between 8 and 10%. On a billion dollars of wagers, that hold produces $80 to $100 million in revenue. DraftKings handles many billions of dollars in wagers per year.

As of Q1 2026, it operates in 27 US states plus Washington DC and Puerto Rico for sports betting, and in 5 states for iGaming. In Q1 2026, sportsbook revenue came in at $1.09 billion (up 24% year on year) and iGaming at $461 million (up 9%). The business is diversifying beyond just sports outcomes.

Flutter Entertainment: The Global Giant Behind FanDuel

Flutter is less familiar to Indian investors but arguably the more interesting business. It is the world's largest online gambling company by revenue, and operates across multiple countries under a portfolio of major brands. Its holdings include FanDuel (the No. 1 sportsbook in the US), Betfair (a pioneering peer-to-peer betting exchange, more on this shortly), Paddy Power, Sky Betting and Gaming in the UK, PokerStars globally, and Sportsbet in Australia.

Betfair deserves a specific mention because it is structurally different from a traditional sportsbook. A standard sportsbook acts as the house: it sets the odds and takes the other side of your bet. Betfair works more like a stock exchange, where bettors match directly with each other, and the platform earns a small commission on winning bets. Both sides post their odds, the platform matches them, and the exchange keeps the fee. This peer-to-peer model tends to offer better odds to bettors and creates a distinct kind of platform loyalty.

Flutter listed its shares primarily on the NYSE in May 2024, shifting from its original London listing. In 2026, it announced it will delist entirely from the London Stock Exchange effective August 3, 2026, making New York its sole listing venue. That structural shift makes FLUT more directly accessible to US-based institutional investors, which over time could matter for the stock's valuation.

DraftKings and Flutter Financials: Revenue, Profit and Market Share

These are not early-stage startups burning cash in search of a business model. Both companies are operating at real scale, generating substantial revenue, and increasingly generating profit.

Source: Company earnings releases via SEC EDGAR 8-K filings, Yahoo Finance, iGaming Business

*Flutter's FY2025 GAAP net loss of approximately $407 million was largely driven by a non-cash impairment of around $561 million taken after India banned its real-money gaming operations. The underlying business generated positive adjusted EBITDA. Adjusted for this one-time item, the group's profitability trajectory is intact.

DraftKings crossed into full-year GAAP profitability for the first time in FY2025. That is a meaningful milestone for a company that was once burning hundreds of millions of dollars a year acquiring customers in newly-legalized states. The adjusted EBITDA growth tells the operating leverage story more clearly: Q1 2026 adjusted EBITDA grew 64% year on year while revenue grew 17%. The cost of acquiring users in mature markets is normalizing, and every additional dollar of revenue is flowing through to profit at an accelerating rate. FY2026 guidance calls for adjusted EBITDA of $700 to $900 million, which would represent roughly a doubling from FY2025 levels.

Flutter's margin story is similar in the US. FanDuel's US adjusted EBITDA grew 82% in FY2025 to $922 million. The international business is more complex, with a mix of high-tax markets like Italy and mature, competitive markets like Australia. The group-level EBITDA trajectory in Q1 2026 was softer (+2% year on year), which was one of several things rattling investors in 2026.

Why Are DraftKings and Flutter Stocks Down?

Here is where the story gets genuinely interesting. You have two companies with real market leadership, double-digit revenue growth, improving profitability, and a near-duopoly in one of the fastest-growing consumer markets in the US. So why are their stocks each down roughly two-thirds from their peaks?

The answer has two parts, with different origins for each company but the same underlying threat.

DraftKings: A Tale of Two Very Different Declines

DraftKings hit its all-time high of $74.38 on March 22, 2021, at the peak of the SPAC and pandemic-era growth-stock euphoria. The company had gone public through a SPAC merger in 2020, which gave it access to public markets without the traditional scrutiny of a standard IPO. During that period, anything with "tech," "sports," "disruption," and "growth" in its pitch deck traded at extraordinary multiples. DraftKings was valued at over 36 times annual revenue at its peak.

Then 2022 arrived. Rising interest rates crushed the valuations of every loss-making growth company, regardless of sector. DraftKings was still burning hundreds of millions of dollars a year on customer acquisition as new states legalized betting one by one. The stock fell from $74 all the way to roughly $10 by August 2022. Over the next three years, as the company steadily moved toward profitability, the stock recovered, climbing back near $48 in early 2026.

Then it fell again. This second collapse had nothing to do with interest rates or SPAC-era excess. It came from a competitive threat most analysts had underestimated.

Flutter: A 10-Month Collapse

Flutter's decline is more recent and more dramatic in speed. The stock hit its all-time high of $313.69 on August 7, 2025. In less than a year, it lost approximately two-thirds of its value.

The first major blow came on February 26, 2026, when Flutter reported FY2025 earnings that missed guidance. The US business grew slower than expected, the India impairment was a surprise to most investors, and the FY2026 guidance came in below what analysts had projected. The stock fell roughly 14 to 15 percent in a single trading session. Then, in May 2026, FanDuel's CEO Amy Howe departed unexpectedly. Leadership exits at this level in operationally complex businesses tend to unsettle investors, and this was no exception. Flutter also revised its FY2026 guidance downward during the same month.

Underneath both of these company-specific events was the same industry-wide concern that drove DraftKings' second collapse: the rise of prediction markets.

The Real Villain: What Are Prediction Markets, and Why Do They Threaten Sportsbooks?

To understand why both stocks have fallen so hard in 2025 and 2026, you need to understand prediction markets and why Wall Street decided they represented an existential threat.

A prediction market is a platform where users trade contracts representing the probability of a future outcome. For each event (say, a World Cup semifinal), the platform lists a contract that pays $1 if one team wins and $0 if they lose. This contract then trades between participants, with its market price at any moment reflecting what the collective group believes the probability is. If the contract is trading at $0.65, the market is implying a 65% chance of that outcome occurring. That is the prediction market mechanism: financial trading on probabilistic outcomes rather than traditional sports bookmaking.

Now here is the regulatory detail that changes everything. Traditional sports betting platforms like DraftKings and FanDuel operate under state-level gaming licenses. Every US state that legalizes online sports betting sets its own framework, its own licensing fees, and its own tax structure. These state gaming taxes range from 10% in Colorado to an extraordinary 51% in New York. Illinois introduced a progressive tax of up to 40% of adjusted gross revenue in 2024, and then added $0.25 tax on the first 20 million annual online wagers per operator and $0.50 above 20 million from July 2025. These are not trivial costs.

Prediction market platforms, primarily Kalshi and Polymarket, are regulated by the US Commodity Futures Trading Commission (CFTC) as federally-licensed event contract markets. Because they are classified as financial instruments under federal jurisdiction rather than gambling under state jurisdiction, they have argued that state gaming laws do not apply to them. They can operate across all 50 US states without a state gaming license. Without paying state gaming taxes. The structural cost advantage this creates, when competing for essentially the same end user who wants to bet on sports outcomes, is significant.

The growth numbers tell the story. Kalshi's trading volume in June 2026 exceeded $31 billion, a more than 70% surge from May 2026's $17.9 billion, according to Dune Analytics data. Approximately 87% of Kalshi's trailing-12-month volume through early 2026 came from sports contracts. Combined prediction market volume across Kalshi and Polymarket in June 2026 exceeded $50 billion. People are not trading these platforms to speculate on geopolitical elections. They are largely using them as a substitute for sports betting, on a platform that does not charge state gaming taxes.

That is what the market is afraid of. And that fear is embedded in two stocks that have each lost roughly two-thirds of their value.

DraftKings, Flutter and Prediction Markets: The Regulatory Battle

The legal status of prediction markets in the US is not settled. It is one of the most actively contested regulatory questions in American financial and gaming law right now, and the courts are genuinely split.

The core conflict is jurisdictional. Kalshi argues it is a federally-regulated financial exchange, and federal law preempts state gaming statutes. States argue that whatever you call the mechanism, if you are accepting money from users who want to bet on sports outcomes, you are running a gambling operation subject to state gaming law.

As of July 2026, both sides are winning somewhere.

The Third Circuit Court of Appeals issued a 2-1 ruling on April 6, 2026 holding that the CFTC likely has exclusive federal jurisdiction over sports-related event contracts, backing Kalshi's position in a New Jersey case. The CFTC and the Department of Justice have also filed suits against at least nine states, including Arizona, Connecticut, Illinois, New York, New Mexico, Minnesota, Rhode Island, Wisconsin, and Kentucky, attempting to block state-level efforts to ban or criminalize prediction markets.

On the other side, federal district courts in Nevada and Maryland have sided with those states. Minnesota criminalized prediction market operations effective August 1, 2026. Multiple other states are debating similar measures.

The circuit split makes the Supreme Court review widely expected. That process takes years. No one knows how it resolves. And this unresolved legal fight is the single biggest driver of uncertainty for both DraftKings and Flutter, which is precisely why Burry says the market has mispriced them.

Why Michael Burry Bought DraftKings and Flutter

On July 8, 2026, Burry disclosed through his Substack newsletter Cassandra Unchained that he had taken a full-sized position weighted approximately 60% in Flutter (purchased at around $107 per share) and 40% in DraftKings (purchased in the low $26 range), and that he might build each into a full standalone position over time.

His central argument, as reported by both CNBC and Reuters: "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."

On DraftKings specifically, he described the business as "inflecting as an operating business," which in investor language means approaching the point where profitability starts compounding faster than revenue growth (which is now demonstrably true given that 64% adjusted EBITDA growth on 17% revenue growth in Q1 2026). On Flutter, he called it "a fundamentally very good operating business with terrific scale" hurt by what he characterized as past capital misallocation now washing out.

Read the broader pattern of his investing history, and this trade makes consistent sense. In 2020, when every physical casino was shut during COVID and their survival was genuinely in question, Burry built positions in Las Vegas Sands and Wynn Resorts. He held MGM Resorts through 2023, when it represented more than 7% of Scion's disclosed portfolio. He has returned repeatedly to the same category: heavily regulated, politically controversial, institutionally-avoided consumer businesses, bought during periods of maximum fear.

His DraftKings and Flutter bet follows the same logic. The businesses are fundamentally sound. The fear driving the stock prices is real but, in his view, priced at a more severe outcome than the evidence supports.

The Regulatory Fear Discount: Are DraftKings and Flutter Stocks Undervalued?

There is a documented financial concept called the "sin stock discount." Academic research, including a widely-cited study by Hong and Kacperczyk in the Journal of Financial Economics, found that stocks in socially controversial industries (gambling, tobacco, alcohol, firearms) persistently trade at lower valuation multiples than fundamentally comparable businesses. Not because the businesses are weaker operationally, but because a significant portion of institutional capital following ESG mandates is structurally excluded from owning them. Persistent underownership depresses valuations even when the underlying fundamentals are strong.

What we have with DraftKings and Flutter in mid-2026 is something different layered on top of that baseline discount. Call it the Regulatory Fear Discount.

The market is not just valuing these stocks cheaply because gambling is controversial. It is pricing them as if one very specific worst-case outcome has already been confirmed: permanent, tax-exempt, federally-protected prediction market competition, with no regulatory pushback and zero competitive response from the incumbents. That is an extreme assumption to bake into a stock price, especially for two companies that are generating record revenues, approaching record adjusted EBITDA, and together hold 78% of the US sports betting market.

Three conditions tend to create a meaningful Regulatory Fear Discount opportunity: the underlying business is sound (yes, both companies are growing and profitable), the feared regulatory outcome is a probability rather than a certainty (yes, the legal battle is genuinely split), and the incumbents have the resources to respond (yes, both are already building their own prediction market products). All three conditions are present here.

DraftKings and FanDuel Dominate US Sports Betting

One detail consistently underappreciated in all the prediction market commentary is just how concentrated the US sports betting market already is.

Source: LegalSportsReport, company filings, Q1 2026 estimates

FanDuel and DraftKings together hold approximately 78% of US online sports betting gross gaming revenue. This is not a competitive market. It is a duopoly.

Customer acquisition costs for FanDuel and DraftKings run approximately $250 per user. For tier-2 operators, those costs run to $400 or more. That gap widens with scale, not narrows. ESPN Bet, launched by PENN Entertainment with the full weight of the ESPN brand behind it, essentially pulled back in December 2025 after PENN exercised its opt-out of the ESPN partnership. The No. 4 and No. 5 operators together hold about 12% of the market.

The duopoly's pricing power is already visible in practice. When Illinois introduced its per-wager fee in 2025, Caesars Sportsbook moved to charge Illinois users $0.25 per bet to cover the cost. The new taxes in Illinois have reshaped the market, with dominant operators able to pass costs to consumers while smaller operators face structural pressure. FanDuel and DraftKings similarly added $0.50 per-bet surcharges from September 2025. Only an operator with near-monopoly positioning can make that move without losing customers to a competitor.

Prediction markets may take some sports wagering volume from this duopoly over time. But displacing 78% market share held by two entrenched, cash-generating operators with years of compliance investment is a fundamentally different challenge than simply launching a competing product.

How DraftKings and Flutter Are Responding to Prediction Markets

DraftKings and Flutter are not sitting still and waiting to see how the legal battle resolves. They are building prediction market products of their own.

DraftKings launched DraftKings Predictions (internally called DKeX) in December 2025. On the company's Q1 2026 earnings call in May 2026, CEO Jason Robins stated the company intends to "establish a leadership position in Sports Predictions before year-end" and described the company's improving profitability as providing the "firepower to press our advantage in Predictions." Flutter's FanDuel launched FanDuel Predicts in December 2025, through a formal partnership with CME Group, one of the world's largest derivatives exchanges.

These products are being deployed primarily in states where traditional sports betting is not yet legal. This means they open new addressable markets without requiring existing state gaming licenses. If prediction markets ultimately get regulated and absorbed into the traditional gaming tax framework, the incumbents will already have the customer base and brand presence to retain those users. If prediction markets remain federally regulated and tax-exempt, the incumbents will have competitive products in that category already.

It is a hedge built directly into the business model.

DraftKings and Flutter Stock Price Targets: What Analysts Expect

Burry is the name generating headlines, but his view on valuation is broadly consistent with what most Wall Street analysts have been saying for months. The disagreement is not about whether the stocks are cheap. It is about how severe and how permanent the headwinds are.

DraftKings (DKNG): Analyst Views

Source: TheStreet, Markets Daily, TipRanks (July 2026)

Morgan Stanley has set a new price target for DraftKings, maintaining an Overweight rating on the stock. JPMorgan Chase has also maintained an Overweight rating on DraftKings, with analysts expecting the stock price to rise. At DKNG's current price of around $24.9, the consensus target of $34 to $37 implies roughly 35 to 50% upside from current levels. UBS's $49 target implies approximately 97% upside. MoffettNathanson sits at the more cautious end of the bull case at approximately $27. The range in targets reflects genuine disagreement on prediction market impact, not fundamental disagreement about the business model.

Flutter Entertainment (FLUT): Analyst Views

Source: Proactiveinvestors, StocksToTrade, Globe and Mail, TipRanks (June-July 2026)

Jefferies flagged that Flutter's shares now appear to be pricing zero US growth, with the current stock price implying the market assigns essentially no value to FanDuel's continued US expansion. Jefferies has maintained its Buy rating on Flutter Entertainment. Morgan Stanley's $190 target and Jefferies' $210 target both imply more than 75% upside from the current price of around $107.

The lone explicit bear is Citi. Flutter Entertainment has fallen around 65% in roughly a year from its highs, creating a significant debate among analysts about where the stock could go. Citi's Monique Pollard double-downgraded Flutter to a Sell in April 2026, with a target of approximately $92 (below the current price). Her concern is specific: she sees ongoing risk of further guidance cuts through 2026 and believes prediction market competition will remain a structural headwind longer than the consensus expects.

DraftKings and Flutter Valuation: Does Burry’s Bet Make Sense?

To be completely clear about what follows: this is not a price prediction. It is a transparent exercise in understanding what different assumptions about business growth and valuation multiples imply for these two stocks.

The cleanest way to do this is with EV/Revenue multiples, which measure Enterprise Value (broadly, market capitalization adjusted for net debt) as a multiple of annual revenue. For consumer platforms in growing markets, this ratio is a reasonable proxy for what investors are paying per dollar of the company's sales.

DraftKings: EV/Revenue Scenario Analysis

Based on FY2026E revenue guidance midpoint of approximately $6.7 billion. Simplified illustration; net debt adjustments not reflected.

At a roughly 2.0x EV/Revenue multiple, DraftKings is priced at its most depressed level outside the 2022 rate-shock period. Even a conservative reversion to 2.5x (still well below the company's own history outside the 2021 bubble) implies meaningful upside. Morgan Stanley's $39 price target is broadly consistent with a 3x EV/Revenue multiple on forward estimates. On an adjusted EBITDA basis, DraftKings trades at approximately 15 to 17 times FY2026 estimates (midpoint $800 million), declining toward roughly 11 times FY2027 estimates as EBITDA continues scaling. 

For a duopoly-positioned business with double-digit revenue growth in a market that is still in early innings of national legalization, these multiples represent a fraction of what the sector traded at during its expansion phase.

Flutter Entertainment: EV/Revenue Scenario Analysis

Based on FY2026E revenue guidance midpoint of approximately $18.3 billion. P/S-based approximation; enterprise value adjustments simplified for illustration.

Flutter at 1.6x forward revenue is cheaper than many global consumer businesses with significantly slower growth profiles. Jefferies' explicit observation that the stock is "pricing zero future US growth" is consistent with this math: if you model FanDuel's US business contributing zero incremental value above its current run rate, you arrive at a price close to where the stock trades today. FanDuel US grew adjusted EBITDA 82% in FY2025. "Zero future growth" is a severe assumption for a business with that trajectory in a market that has still not been legalized in California or Texas.

None of these scenarios should be taken as price targets. They are a way of understanding what the current stock price implies about the future, and whether those implied assumptions reflect reality or extreme pessimism.

Who Else Is Investing in DraftKings and Flutter?

Burry is the most headline-friendly name in this trade. He is not the only major investor with a concentrated position.

On Flutter, Cayman Islands-based billionaire Kenneth Dart has built a stake exceeding approximately 25% of Flutter's outstanding shares, combining direct share ownership and equity swap instruments, making him the largest private shareholder in the company. Dart is not a passive index fund. His stake represents a concentrated, high-conviction position from an investor with substantial resources for due diligence. London-based Parvus Asset Management, an activist-leaning European fund, holds approximately 10% of Flutter shares.

The convergence of Burry's contrarian thesis, a broadly bullish analyst consensus, and concentrated institutional ownership from names like Dart and Parvus creates an interesting alignment around the same basic conclusion: the current price reflects excessive fear rather than fair value.

Whether that conclusion is correct remains to be seen. But these are not small, speculative positions from uninformed retail participants.

Bear Case: Risks to Michael Burry’s DraftKings and Flutter Bet

The prediction market threat may not be temporary. If the Supreme Court eventually rules definitively in favor of CFTC exclusivity, prediction markets would be permanently legal nationwide without state gaming taxes. That would be a structural change in the competitive economics of sports wagering, not a short-term headwind. Kalshi posted a $31 billion June record as the World Cup drove volume growth, suggesting the platform's growth is tied to genuine sporting demand rather than novelty alone.

State tax escalation is an ongoing and compounding risk. New taxes have reshaped the Illinois sports betting market, with the progressive AGR tax structure reaching up to 40% for the largest operators. New York already taxes sportsbooks at 51% of gross gaming revenue. If other large states follow this playbook, the unit economics of new-state launches deteriorate significantly. Chicago has a separate city-level tax proposal still in debate.

Flutter's guidance risk is specific. Citi's Monique Pollard, the most rigorous bear case analyst on the stock, has flagged the risk of a second guidance cut, following the May 2026 downward revision. Flutter already surprised investors with a guidance miss in February 2026. A second cut would likely accelerate selling pressure.

California and Texas remain locked. Together, these two states represent the largest untapped opportunity in US online sports betting. California voted down legalization in 2022. Texas remains politically resistant. Every year these markets stay closed reduces the scale of the long-run upside case for both companies.

Timing risk is genuine and could be lengthy. The Supreme Court process, assuming the issue reaches it, takes years. These stocks could stay under pressure for an extended period even if the regulatory outcome eventually favors the incumbents. Burry can be right on the thesis and wrong on the timeline.

Our Take

Burry's thesis has internal logic that holds up. DraftKings and Flutter are not broken businesses dressed up as investment opportunities. They are profitable, growing, duopoly-positioned companies trading at multiples that imply their best growth is already behind them. At 2x EV/Revenue for DraftKings and 1.6x for Flutter, the market is assigning a very severe probability to a very specific outcome: that prediction markets permanently displace a meaningful portion of these companies' businesses, that no regulatory response materializes, and that the incumbents cannot compete in the new environment. The legal record, the incumbents' own product responses, and the structural advantages of their existing licenses all argue against that being a settled matter.

The duopoly argument is concrete. Displacing 78% combined market share, held by two operators who have spent years and billions building state-by-state compliance infrastructure, with a legally contested platform that does not yet have that infrastructure, is a higher bar than current stock prices seem to acknowledge.

That said, the legitimate concerns are also real. Burry could be years early on the timing. Flutter faces near-term execution risks and the possibility of another guidance cut. State tax escalation is not a theoretical risk; it is happening. And for all the narrative power of the Burry name, his post-2008 investment track record is genuinely mixed.

The question we would ask is not "should I copy Burry?" The question is whether the regulatory fear embedded in these stock prices reflects extreme pessimism about an uncertain outcome, or fair pricing of a business permanently impaired. Based on the duopoly structure, the margin inflection trajectory, the historical behavior of sin stocks during periods of regulatory uncertainty, and the incumbents' active product responses, there is a credible case that the market has overcorrected. The bear case is real enough that certainty in either direction would be misplaced. Thoughtful investors should weigh both sides, understand their own tolerance for a trade that could take years to resolve, and draw their own conclusions from the data rather than the headline.