Flutter’s move into prediction markets ‘predictable,’ Truist analyst says
After Flutter Entertainment’s announcement that it would enter the event-contract market, stock analysts were quick to react. Flutter disclosed that it was partnering with prediction-market giant CME, which is federally regulated, to offer derivatives.
“The company currently offers speculating contracts on daily closes of market, commodity and currency pricing, with the two parties having yet to define plans for contracts beyond what CME offers,” said one report, released August 20. Should the Commodity Futures Trading Commission approve, the products would hit the market in the fourth quarter.
Truist Securities analyst Barry Jonas called the change “predictable,” saying that “sports products were not mentioned — though this should set them up to turn on that switch at some point should they choose.” He called the market “enticing” at a time when sports betting taxes are going up and “upstarts” such as Kalshi were fishing in sports-wagering waters.
However, Jonas cautioned, “regulated operators should tread carefully not to upset state gaming regulators and partners in their core business today. Federal views on prediction could also vary in the future with a different administration in Washington.”
The Truist analyst thought DraftKings- and FanDuel-branded event contracts could jump to the forefront of the market if offered. He also felt there was minimal risk to the sports betting giants in the states where they are licensed.
The real risk to Flutter subsidiary FanDuel, Jonas opined, lay in such states as California and Texas, where it is not licensed. Those states aren’t able to ban prediction markets at this time.
Continued Jonas, “we see today’s announcement as an appropriate early move for Flutter to position themselves well for if/when they decide to launch sports-related event contracts. We believe partnering with the established derivatives leader CME gives FanDuel credibility as they explore this newer market.”
He noted that DraftKings was likely to follow and soon, having been in talks with privately held Rainbird Exchange.
Jonas’ opinion was that sports-related events contracts were inferior products to existing sports wagering and “that it has seen no impact so far in states where both are live.” However, he felt the competition was improving, noting that Kalshi was offering wagers on point spreads and proposition bets.
The analyst continued by pointing out that the prediction markets were rampant in states where sports betting was not offered. But Flutter had 20 years’ experience of offering event contracts outside the United States, positioning it to compete, he added.
Jefferies Equity Research analyst James Wheatcroft largely seconded Jonas’ views, writing that “while sports contracts are not part of the initial offering, the partnership provides FanDuel with the regulatory and technical infrastructure to launch any new product quickly.” He refrained from assessing the probable financial effect, taking a wait-and-see attitude on the products to be offered by Flutter.
According to Wheatcroft, the initial Flutter product line “will include daily markets such as commodity and exchange-rate closing prices, as well as longer-dated markets such as S&P 500 and Nasdaq-100 futures … For FanDuel, a partnership with the world’s largest derivatives marketplace helps ensure it is well-positioned to capitalize on emerging event-based contract opportunities and can be agile when launching any new products.”
Concluded Wheatcroft, “FanDuel’s new partnership provides a channel through which sports and other event-based contract opportunities can be explored, though we expect regulatory stances and stakeholder sentiments will ultimately guide the product roadmap.”
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David McKee is an award-winning journalist who has three decades of experience covering the gaming industry.
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