Flutter execs hope for prediction-market shutdown, analyst says
A Ninth Circuit Court of Appeals ruling on prediction markets provided clarity, executives of Flutter Entertainment said, but event contracts “being completely switched off would likely be the best outcome,” according to J.P. Morgan analyst Daniel Politzer.
The Morgan analyst met with Flutter Chief Financial Officer Rob Coldrake and Director of Investor Relations Sophie Nottage in London this week. His findings were published on 24 September.
Politzer found the overall tone of the meeting “constructive” and said that near-term confusion on the legality of prediction markets was the worst-case scenario facing Flutter. He added that subsidiary FanDuel was recapturing US handle share and increasing its number of active players. Greater promotional generosity was credited for the turnaround, accounting for 40% of gross gaming revenue.
Customer demand and player volumes also were said to have exceeded expectations. However, stock repurchases were nixed until Flutter reduces its debt burden.
Flutter execs confessed to Politzer that they might have “over-monetized” (their words) their US customer base. They felt that had been insufficiently generous with promotional offers in the fourth quarter. In tandem with three solid months in which luck favored the books, “drove customer fatigue,” as Politzer put it.
Compared to the promotional outlays of Fanatics Sportsbook and Bet365, FanDuel’s 30% promotional allocation was found not to be competitive. Having increased its promo rate by one-third, FanDuel was experiencing better business, seeing upward trends in market share and monthly active users.
“The rewards program and more strategic promos (e.g., BetProtect+) have been effective, and paybacks remain compelling in the 14-16 month range (vs. 24 month threshold),” Politzer added. The company anticipated that FanDuel’s 40% promotional rate would hold true throughout 2027.
Flutter bosses perceived a “halo” from World Cup action that was carrying FanDuel over the dog days of summer and into the prime sports season. Not only was demand for soccer continuing, baseball betting was described as potent and all-important NFL wagering was characterized as “extremely strong.”
Politzer took those comments to mean that FanDuel’s handle volume was comparable to that of main rival DraftKings. Flutter leadership saw an August deceleration in igaming play but placed little stock in it. The downturn was attributed to fewer weekend days and no Labor Day weekend that month.
Casino-labor unions were perceived as a major impediment to igaming legalization in New York State. Coldrake and Nottage were more optimistic about Virginia, Maryland and Washington, D.C., as prospective igaming markets.
Overseas, Flutter “continues to see strong momentum as it benefits from scale and diversification,” Politzer chronicled. Building on solidity in Italy, Flutter looked to grow international cash flow by as much as 10% and was optimistic about 2027.
The market in the United Kingdom and Ireland was viewed as getting better, ameliorating recent UK tax increases, further helped by cost-cutting. A retail-gambling tax recent pitched in the British Isles was dismissed as a non-factor.
One wild card was Brazil, whose president wants to ban igaming. “Anything could happen” was Coldrake and Nottage’s assessment.
However, they assumed a continuation of the present setup in the country. They also forecast a Brazilian break-even achievement in 2027, undoing a 2026 loss in that nation of US$70 million.
David McKee is an award-winning journalist who has three decades of experience covering the gaming industry.
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The Backstory
FanDuel’s reset moved prediction markets to the center
Flutter Entertainment’s latest discussions with investors land after a year in which FanDuel’s parent company repeatedly recalibrated its U.S. strategy around two pressures: restoring momentum in its core sportsbook and deciding how aggressively to pursue prediction markets.
The company’s tone has shifted over several quarters. Earlier this year, Flutter executives described prediction markets as a developing opportunity that required monitoring. By late summer, they were more direct about the uncertainty surrounding event contracts and their potential to draw customers away from regulated online sports betting. The stakes are high because FanDuel remains Flutter’s most important growth engine, and any federally regulated alternative that bypasses state betting laws could alter the economics of U.S. wagering.
The context for the current investor readout includes FanDuel’s internal course correction. Flutter executives have acknowledged the company leaned too hard into monetization and not enough into customer incentives, an approach that contributed to fatigue after a favorable run of sports results for bookmakers. That concession helps explain why management has been willing to sacrifice near-term earnings for promotional spending, loyalty benefits and product investment.
Analysts first pressed for details on handle and margins
The tension was visible in March, when Flutter executives faced detailed questions during a fourth-quarter earnings call. As reported in a contentious exchange with analysts over Flutter’s earnings outlook, Chief Financial Officer Rob Coldrake declined to provide precise handle or hold guidance, saying the company did not “obsess” over handle because it can be distorted by promotions and parlays.
That stance reflected a broader concern for investors: FanDuel was still producing growth, but the quality of that growth was harder to evaluate. Promotional intensity, customer acquisition costs, parlay mix and tax pressure all affected profitability. Illinois had already raised taxes, with Flutter saying the increase had a US$50 million impact and that about half could be mitigated in 2025.
Prediction markets were a secondary issue on that March call, but executives did not dismiss them. Coldrake said Flutter was watching closely and suggested the category could become an opportunity, though not as rich as a conventional sportsbook. The company was also preparing for expensive launches in Missouri and Alberta, while Brazil presented a separate cash-flow drag as Flutter moved to integrate NSX and compete in a legacy market with established operators.
That combination — U.S. promotional pressure, new-market losses, higher taxes and emerging competition from event contracts — set up the later debate over whether prediction markets were an incremental channel or a structural threat.
Management changes sharpened the customer-first message
By May, Flutter’s commentary had turned more defensive. In a first-quarter call marked by broad answers and FanDuel leadership upheaval, the company did not dwell on the removal of FanDuel CEO Amy Howe. Chief Executive Peter Jackson instead framed the moment as a return to a “customer-first approach,” while insisting there was no fundamental change in strategy.
That message was important because FanDuel’s business was being retooled around loyalty and retention. The April rollout of FanDuel’s loyalty program drew a positive response, according to management. Flutter said average monthly icasino players rose 10% and igaming revenue climbed 19%, giving executives a stronger story in digital casino even as sports betting remained exposed to unfavorable results and promotional competition.
Prediction markets drew more questions from Wall Street than any other subject. Jackson said Flutter saw limited cannibalization at the time and described event contracts as an incremental customer-acquisition tool in states without legal sports betting. He also said FanDuel’s own prediction-market revenue was modest, while signaling a larger milestone tied to the 2026-27 NFL season.
The remarks showed Flutter trying to keep optionality. It wanted to preserve relations with state regulators, tribes and leagues, but it also did not want DraftKings, Kalshi or other players to define a market that could reach customers in states where sportsbooks remain illegal. That balance has become harder as litigation and regulatory scrutiny have intensified.
Summer brought taxes, investment and a larger earnings trade-off
Flutter’s earlier confidence in FanDuel’s trajectory was evident in its second-quarter results discussion, when management highlighted FanDuel’s revenue growth and product gains. Jackson said U.S. revenue rose 17%, player counts increased 32% and FanDuel reached its highest gross-revenue margin. The company also emphasized rewards, new game titles and single-game parlay expansion across sports.
But the call also showed the cost of defending market share. Flutter criticized Illinois’s new handle tax and said FanDuel would respond with a bet surcharge beginning Sept. 1. Management called Illinois an outlier, but the episode underscored how state tax changes can compress sportsbook economics and raise the appeal of alternative products that do not carry the same state-level cost structure.
Flutter was also pursuing a US$300 million cost-savings plan by 2027 while carrying US$8.5 billion in debt at quarter’s end. The company maintained a long-term ambition to return US$5 billion to shareholders, but that goal depended on balancing deleveraging with continued investment. Coldrake’s later message that buybacks would be constrained until leverage fell fits that pattern.
By August, the trade-off became explicit. In a guidance cut paired with higher FanDuel investment, Flutter lowered full-year revenue expectations by US$395 million and cash-flow guidance by US$210 million. The company attributed part of the reduction to strengthening FanDuel’s sportsbook proposition and accelerating momentum.
Jackson defended the added US$270 million investment as necessary, pointing to customer engagement during the NBA playoffs and World Cup, record Major League Baseball handle and encouraging early third-quarter trends. Coldrake called the increased promotional generosity deliberate and said paybacks remained attractive. Still, management also acknowledged prediction markets were causing low-single-digit cannibalization, a notable shift from earlier comments that emphasized limited impact.
Wall Street saw an opportunity operators could not ignore
The strategic bind was laid out most clearly by J.P. Morgan analyst Daniel Politzer. In a September investor note on prediction markets and online sportsbooks, Politzer argued the category could be “too good to pass up” for large operators such as FanDuel and DraftKings, especially in states without legal sports betting.
His analysis framed event contracts as both an expansion route and a political hazard. A federally regulated prediction-market model could let operators reach customers in Texas, Georgia and other states where sports betting remains illegal. But it also risks provoking state gaming commissions, tribes, sports leagues and responsible-gaming advocates, all of whom have reasons to oppose products that resemble sports wagers without state taxation or gaming oversight.
Politzer estimated large upside if operators could adapt exchange pricing into products resembling parlay betting in nonlegal states. He also cited substantial risk, including challenges from attorneys general and concerns about circumvention of state rules. That tension explains why Flutter executives have alternated between enthusiasm and caution. The company has Betfair experience in event contracts, but FanDuel’s U.S. business relies on regulated-state relationships that could be damaged by moving too aggressively.
The current investor commentary therefore follows a clear chain of events. FanDuel lost some customer momentum after underinvesting in promotions. Flutter responded with a loyalty push, richer offers and lower earnings guidance. At the same time, prediction markets evolved from a speculative opportunity into a material strategic question. Whether regulators shut them down, courts preserve them or sportsbooks absorb them will influence FanDuel’s growth path, Flutter’s capital allocation and the future balance of power in U.S. online wagering.
