Michael Burry Is Buying the Sportsbooks Wall Street Gave Up On
Michael Burry just went long DraftKings and Flutter — the two stocks the market left for dead on the bet that prediction markets win permanently. His wager is that Washington closes the loophole first. Here's the trade, and the one court ruling that breaks it.
Michael Burry does not buy stocks that are working. His entire career is a catalog of moments when he stood on the opposite side of a consensus so loud that being early looked, for a while, like being wrong. So when a July 8 disclosure showed him building a full-sized position in DraftKings and Flutter Entertainment — two stocks the market has spent the better part of a year burying — the interesting question was never whether Burry is contrarian. It's what, exactly, he thinks everyone else has priced incorrectly.
The answer is a bet on Washington. And it runs directly against one of the most confident trades in the market right now.
The trade the market has already made
The consensus is simple, and until recently it looked unbeatable: the regulated sportsbook is a dying business model, and the prediction market is eating it.
The numbers behind that story are real. Combined monthly volume across Kalshi and Polymarket hit roughly $44.8 billion in June 2026, propelled by a World Cup summer that turned event contracts into a mainstream product. Kalshi alone traded about $31.5 billion in June and was last valued near $22 billion after a $1 billion raise. Polymarket, carrying an investment of up to $2 billion from the owner of the New York Stock Exchange, sits around a $15 billion valuation. A category that Wall Street was openly mocking eighteen months ago is now worth more, on paper, than the incumbents it is trying to replace.
And it does it with a structural edge the sportsbooks cannot match. Prediction markets clear their sports contracts as federally regulated event derivatives under the Commodity Futures Trading Commission — which means they operate nationwide, sidestep the state-by-state licensing regime, and avoid the state gaming taxes that DraftKings and Flutter pay in every jurisdiction they enter. Same wager, lower cost structure, no state house to negotiate with. If that arbitrage is permanent, the incumbents really are impaired.
The market has voted accordingly. DraftKings has fallen about 45% from the 52-week high it set last September; it closed at $24.94 on July 17. Flutter — the parent of FanDuel — is down roughly 65% from its August peak. These are not gentle repricings. This is the tape treating a structural loser as exactly that.
Why Burry is on the other side
Burry's disclosure put roughly 60% of the position in Flutter, bought around $107, and 40% in DraftKings in the low $26s. The framing that accompanied it was blunt: he expects regulators to rein in prediction markets, closing the gap the market assumes is permanent.
He is not betting on a hunch. The regulatory turn has already started to move.
In March, Senators Adam Schiff and John Curtis introduced the "Prediction Markets Are Gambling Act" — a bipartisan bill that would bar sports and casino-style event contracts from CFTC-regulated platforms outright. Schiff, who sits on the Senate Agriculture Committee that oversees the CFTC, has called the agency "completely unequipped" to police a category that has scaled faster than anyone at the commission anticipated. In June, the CFTC itself released a 267-page proposal to redraw the rules around which event contracts it will permit — including a provision aimed at contracts deemed contrary to the public interest. And gaming stocks jumped on reports that lawmakers intend to wall sports betting off from the prediction-market venue for good.
The whole bull case for prediction markets rests on one assumption: that the loophole holds. Burry is wagering it doesn't — and that the two most beaten-down names in the space are priced for a world that Washington is now actively trying to prevent.
Which sets up the only questions that matter for the trade.
The rest of this briefing is for paid members: the valuation math on why the -45% and -65% drawdowns may have overshot, the three-path regulatory scenario framework (loophole closes, stalemate, or gets enshrined), the single court ruling that would break Burry's thesis, and the bottom-line positioning — including which of the two names is the cleaner expression of the trade.
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