Michael Burry Adds to DraftKings Stake, Says Thesis Unaltered

Famed investor Michael Burry on Friday noted he added to his recently initiated long position in DraftKings (NASDAQ: DKNG), one of the largest U.S. online sportsbook operators.

In a wide-ranging Substack post, Burry told readers he added to DraftKings in the $25 range. The gaming stock closed at $24.94 on Friday. The stock has traded lower since July 8, the day he revealed that he started positions in DraftKings in the $26 area and in FanDuel owner Flutter Entertainment (NYSE: FLUT) around $107. Flutter closed at $106.56 yesterday.

It appears as though the “Big Short” investor didn’t up his Flutter position. Regarding DraftKings, despite recent weakness in that name, Burry wrote there’s “no change in the basic thesis.”

He told readers he expects to profile the two gaming stocks in more detail in the coming weeks. FanDuel and DraftKings are the two largest U.S. sportsbook operators.

Understanding Burry’s Bets on Betting Stocks

The unchanged thesis on DraftKings Burry mentioned yesterday is easy to understand. First, he sees DraftKings evolving into an operationally superior company. Second, while acknowledging there have been missteps at FanDuel, he views Flutter as a fundamentally solid operator.

Moreover, his bullishness on the two sports betting titans is rooted in the notion that at some point, the “regulatory reaper” could come calling for prediction markets. In his initial bull call on DraftKings and Flutter, Burry noted prediction markets are basically functioning in a “loophole economy” in which states grapple with regulatory and taxation issues.

He’s betting that situation won’t be permanent and when the regulatory screws tighten on prediction market operators, sports wagering companies, such as DraftKings and FanDuel, could benefit.

The investor believes that the current political climate portends a regulatory crackdown of sorts coming for prediction markets — one in which states demand their share of the tax pie as they do with sports wagering.

Supreme Court Could Boost Burry’s Bets

Looking further out, the Supreme Court could be the catalyst for a sports betting equity resurgence. Some states are readying for that fight.

That thesis is rooted in the fact that a plethora of states are pursuing litigation against yes/no exchanges and while the states have a winning record against those companies, there are occasions when prediction markets notch wins. With that lack of uniformity, some legal experts believe the Supreme Court will ultimately hear a prediction markets case, but that may not happen until next year or 2028.

For now, it’s speculative exercise, but if prediction markets are eventually forced to abandon sports derivatives, DraftKings and FanDuel would benefit. So would Burry.