Michael Barry, bet on sportsbook DraftKings, Flutter

Michael Barry of ‘The Big Short’ fame says he has bought stock in a regulated sports betting operator draft kings and flutter entertainmentexpects regulators will eventually crack down on prediction markets after competition from startups weighed on stock prices.

Berry said Wednesday that he purchased a full-size position of about 60% in Flutter and 40% in DraftKings, with Flutter at about $107 a share and DraftKings in the low $26 range. He said he could eventually increase each holding into a fully independent position.

The investor, who made a name for himself by predicting the 2008 U.S. housing crash, said both companies were attractive and that the rapid expansion of prediction markets was putting pressure on their stock prices.

These platforms increasingly offer event-based contracts, which the U.S. Commodity Futures Trading Commission claims falls under its jurisdiction. Federal agencies are currently suing several states over who can regulate prediction markets. The deal also allowed them to avoid state gaming taxes.

“We believe the political climate will not tolerate this,” Barry said in a post on Substack on Wednesday. “Prediction markets exist in a loophole next to a highly regulated and taxed industry. Over time, prediction markets will be subsumed into regulation and taxation.”

DraftKings stock is down about 45% from its 52-week high last September, and Flutter is down 65% from its August high.

“DraftKings is being leveraged as an operating business and its value is in transition, which is expected in the near future,” he wrote. “Flutter has been hurt in the past by misallocation of capital, but fundamentally it’s a very well-run business and has great scale.”

The companies have also begun exploring their own prediction market services and could stand to benefit regardless of how the regulatory environment evolves, Barry noted.