Prediction-market threat to Flutter overrated, Jefferies analyst says
Jefferies Equity Research analyst James Wheatcroft placed a “Buy” rating with a US$210 per share price target on Flutter Entertainment in a 26 July investor note. The stock was trading at US$100.82 at the time.
Wheatcroft cited “a positive inflection point” for Flutter. He said there had been no material cannibalization of online sports betting revenues by prediction markets. “Our deep-dive on market-making in PMs signals incremental profitability,” Wheatcroft added.
The analyst said he expected a positive reversal in Flutter’s narrative in the stock exchanges, as the story took hold.
Wheatcroft pointed out that Flutter stock had lost 65% of its value in the past year, mostly because of prediction-market fears. He said there were three sources of upside in this climate. The first was market making and the second was the launch of FanDuel Predicts by Flutter. For the third, Wheatcroft cited the regulatory preference for online sports betting over prediction markets. He said that the latter was incremental to Flutter, not a source of worry.
What Wheatcroft called a “powerful, but misplaced narrative” about prediction markets had, he said, become unglued. OSB handle was back up and prediction markets were not gaining much traction in OSB-enabled jurisdictions.
Indeed, the analyst observed, “OSB operators now leverage their pricing models to market-make on PM platforms, adding incremental profitability from states where OSB is not permitted.”
Wheatcroft foresaw US$340 million in Flutter cash flow coming from market making, “assuming a 25% market-making share of Kalshi parlays.” He noted that Wall Street expected nothing at present from Flutter’s market-making products, only a US$300 million investment.
The debut of FanDuel Predicts, he continued, could add US$150 million in annual cash flow, “while regulatory leverage should catalyse further OSB regulation and contain state tax hikes.” In light of this, Wheatcroft said prediction markets would have to devour 50% of OSB handle before they ate into market share.
Predicting a second-quarter earnings beat, Wheatcroft said Flutter would end a recent string of underperformances. He predicted that Flutter would deliver US$126 million in cash flow, 21% more than Wall Street was expecting.
Combined with a greater presence in market making, Flutter would have an easier time of meeting seemingly difficult second-half goals, Wheatcroft opined, “addressing a key area of investor concern.”
Were Flutter to be de-rated, the analyst concluded, “for reasons that turn out to be wrong … we would expect a commensurate re-rating as that understanding evolves.” Should prediction-market products add to Flutter’s total addressable market and profits, then a still-higher valuation of the stock would be in order, per Wheatcroft.
David McKee is an award-winning journalist who has three decades of experience covering the gaming industry.
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The Backstory
Investor anxiety built around a new form of betting
Flutter Entertainment’s latest defense from Jefferies lands after months in which prediction markets moved from a niche regulatory dispute to a central concern for investors in U.S. online sports betting. The worry is straightforward: Sports-event contracts offered on federally regulated prediction-market platforms could let consumers make wagers that look similar to sports bets without going through state gaming regimes, licensing costs or tax structures.
That fear has weighed heavily on Flutter, whose FanDuel unit is one of the largest U.S. online sportsbook operators. Jefferies analyst James Wheatcroft’s July note argues that the market has overstated the risk and underestimated the ways FanDuel could benefit from the same trend. His position builds on an earlier Jefferies view that Flutter’s apparent weakness was not evidence of prediction-market cannibalization. In that February analysis, Wheatcroft said softer handle at FanDuel was more likely tied to a weaker sports calendar, reduced promotions and other nonstructural factors than to customers migrating to event-contract platforms.
The July argument goes further. Rather than treating prediction markets only as a competitive threat, Wheatcroft frames them as a potential profit pool for Flutter through market-making activity and FanDuel Predicts, its own event-contract product. That reframing matters because the stock-market debate has shifted from whether prediction markets exist at scale to whether they can materially erode online sports betting economics in states where betting is already legal.
Regulatory gaps created the opening
The growth of sports-event contracts has been driven partly by the split between state gambling oversight and federal commodities regulation. Sportsbooks operate under state-by-state licensing systems, with detailed suitability reviews, geolocation requirements, responsible-gaming rules and significant tax rates. Prediction-market operators have instead argued that their contracts fall under the Commodity Futures Trading Commission’s jurisdiction, giving them a different compliance path and potentially national reach.
That distinction has attracted scrutiny from gaming operators, state regulators and tribal governments. In an April note, Jefferies analyst David Katz warned that prediction markets face a mounting risk of regulatory and political backlash. Katz said the sector benefits from an “enforcement-light” CFTC posture compared with the “intensive and exhaustive review” imposed on gambling companies by state regulators. He also pointed to the absence of mandatory safeguards such as self-exclusion, loss limits, time limits and responsible-gambling messaging.
Those differences help explain why established sportsbook operators have taken a dual approach. They are watching the category as a potential competitor while also exploring whether their pricing models, customer data and trading expertise can translate into market-making revenue. For large operators, the outcome could be asymmetric: If prediction markets are curtailed, a rival channel is weakened; if they are legitimized, scaled brands may be well positioned to participate.
Tribal and state challenges raised the stakes
The political resistance is especially acute in tribal gaming, where exclusivity rights are tied to compacts and the Indian Gaming Regulatory Act. Tribal leaders argue that sports-event contracts can bypass agreements that govern who may offer gambling on tribal lands and in states where tribes hold privileged market positions.
The Indian Gaming Association recently escalated the issue in Washington, saying prediction markets pose an urgent threat to tribal gaming and sovereignty. Tribal representatives said event contracts function as sports bets routed through futures exchanges, not as financial instruments. They also warned that platforms lacking geofencing could operate on tribal lands without tribal authorization, undercutting both sovereignty and revenue used to fund government services.
That pressure is not limited to national advocacy groups. In Connecticut, the Mohegan Tribal Gaming Authority backed state efforts to block prediction-market platforms after regulators sent cease-and-desist letters to Kalshi, Robinhood and Crypto.com. The tribe said it supported Connecticut’s attorney general and gambling regulator in litigation intended to enforce state law and IGRA. Its position, described in a warning by the Mohegan Tribe over prediction markets in Connecticut, reflects the broader tribal concern that federally regulated contracts could erode negotiated gaming exclusivity.
States have also moved independently. Nevada and Tennessee have taken enforcement positions, while other jurisdictions are testing different legal theories. Some argue that sports contracts are illegal gambling. Others focus on whether the federal commodities framework was intended to cover sports outcomes at all. The result is a fragmented national fight that could eventually require congressional action or a Supreme Court ruling.
Why Flutter became the market’s test case
Flutter has been exposed to the prediction-market debate because FanDuel is one of the most valuable assets in U.S. sports betting. Investors have treated any credible alternative to regulated sportsbooks as a threat to FanDuel’s long-term handle, margins and valuation. That made Flutter’s share price a proxy for the broader question of whether event contracts can displace sportsbook activity.
Wheatcroft’s February note already challenged that link. He said FanDuel could still deliver double-digit growth in gambling revenue and cash flow even if handle growth was modest. The logic was that better hold, disciplined promotions and operating leverage can matter as much as raw betting volume. He also projected that FanDuel Predicts could generate revenue, though with near-term investment costs.
The July note turns that into a more bullish thesis. Wheatcroft contends that online sports betting handle has recovered and that prediction markets have not gained much traction in jurisdictions where online sports betting is legal. That distinction is critical. If prediction-market activity is concentrated in states without legal sports betting, it may expand the addressable market rather than cannibalize FanDuel’s existing customers. Flutter could then earn incremental cash flow through market-making on third-party platforms and through its own products, while retaining its sportsbook strength where state-regulated betting is mature.
The argument also assumes that regulators will continue to prefer the sportsbook model because it produces tax revenue and embeds consumer protections. If states view prediction markets as a way to avoid gaming taxes and safeguards, political momentum could favor tighter oversight, limiting the ability of event-contract platforms to compete freely with licensed sportsbooks.
The outcome could reshape U.S. betting economics
The unresolved question is not whether prediction markets are growing, but what legal and commercial category they ultimately occupy. If courts and regulators allow sports-event contracts to remain broadly available under federal commodities law, operators with scale, trading expertise and established brands could move aggressively into the sector. That would likely include FanDuel and DraftKings, which already have the customer relationships and pricing infrastructure to compete.
If courts or Congress restrict sports contracts, prediction-market operators could be forced away from the most sportsbook-like products, preserving state-regulated betting markets and tribal compacts. Katz has suggested that non-sports contracts may offer a less risky path for prediction-market operators seeking to reduce exposure to gaming-law challenges.
For Flutter, that range of outcomes is why Jefferies sees the sell-off as excessive. The bear case assumes prediction markets take material sportsbook share without equivalent participation by FanDuel. The bull case assumes Flutter can protect its core sportsbook business, benefit from market-making and use FanDuel Predicts to enter adjacent markets where legal conditions permit.
The stakes extend beyond one company’s valuation. The fight will influence how betting-like products are taxed, who regulates them, what consumer protections apply and whether tribal exclusivity retains its force in the digital market. Until those questions are settled, prediction markets will remain both a competitive uncertainty and a potential growth channel for the companies investors once assumed they would disrupt.
