Flutter Stock Could Rebound with Help from Supreme Court

Perhaps the best thing for Flutter Entertainment (NYSE: FLUT) would be for the U.S. Supreme Court to hand down a ruling that impairs prediction markets.

That’s the take of JPMorgan analyst Daniel Politzer who recently met with Flutter executives, including CFO Rob Coldrake. Noting that the broader tone of the meeting was positive, Politzer points out that the best outcome for the FanDuel owner would be event contracts “being completely switched off.”

That makes sense because although Flutter executives have said they see little evidence of prediction markets cannibalizing FanDuel in states where sports betting is legal, the stock is down 71% over the past year with investors laying much of the blame for that decline at the doorstep of yes/no exchanges.

Some legal experts have noted that if the Supreme Court takes up a prediction market case, it will likely focus on sports derivatives, implying that even if the high court levies a ruling that’s unfavorable to the industry, all-or-nothing exchanges could potentially continue offering non-sports event contracts.

Why It Matters to Flutter and Friends

In the U.S., Flutter has a prediction market footprint via FanDuel Predicts and the company is allocating resources to growing that business, but the prevailing wisdom in the investment community is that it’s better for operators such as DraftKings and Flutter to see sports event contracts become a thing of the past.

There are multiple factors behind that perspective. There’s the obvious of prediction markets representing competitive threats to traditional sportsbooks. Second, there’s speculation that after seeing purveyors of event contracts grow while paying little in the way of state taxes, more states could approve online sports betting, benefiting companies like Flutter.

Arriving at that scenario is a different ballgame, but some analysts believe the Supreme Court could hear a prediction market case sometime between November and next April. It is clear that FanDuel is reaping rewards from the return of the NFL as the first Sunday of NFL action was the busiest Sunday in FanDuel history.

“Football season is one of the biggest moments on the sports calendar, and this record reflects the incredible energy fans brought to opening weekend,” said the gaming company in a recent LinkedIn post.

Some iGaming Optimism

Though longer-ranging, another potential catalyst for Flutter stock is iGaming expansion. The current roster of states allowing internet casinos stands at eight, but Flutter executives expressed to Politzer that number could grow.

They told the JPMorgan analyst that New York casino labor unions are likely to oppose iGaming there, but they’re constructive on Maryland, Virginia and Washington, D.C. possibly approving that form of wagering.

With iGaming, operators enjoy higher margins and investors often assign higher multiples to stocks with deep internet casino exposure.