Read Between The Lines

Prediction markets have been a hot topic during recent earnings calls, but I'd caution that some of the wishy-washy answers are being misconstrued.

It’s earnings call season, and in addition to revenue hits and misses, customer-friendly sports outcomes, and the usual KPIs, gambling executives have been fielding numerous questions about prediction markets.

---

Sponsor’s Message: Increase Operator Margins with EDGE Boost Today!

EDGE Boost is the first dedicated bank account for bettors.

• Increase Cash Access: On/Offline with $250k/day debit limits

• No Integration or Costs: Compatible today with all operators via VISA debit rails

• Incremental Non-Gaming Revenue: Up to 1% operator rebate on transactions

• Lower Costs: Increase debit throughput to reduce costs against ACH/Wallets

• Eliminate Chargebacks and Disputes

• Eliminate Debit Declines

• Built-in Responsible Gaming tools

To learn more, contact Matthew Cullen, Chief Strategy Officer, Matthew@edgemarkets.io

---

I have a running joke in the newsletter about “speaking politician.” Stage one of speaking politician is noticing sentences that start with “I think” or “I believe.” Basically, the type of language that gives the speaker wiggle room to backtrack later.

This kind of vague language isn’t new in the gambling world, as we saw in Minnesota’s recent sports betting talks, where the gambling world got very excited about a supposed “framework agreement” that would bring sports betting to the Land of 10,000 Lakes.

As I said at the time, “believe,” “possible,” and “hopeful” are doing a lot of work:

“We believe it is possible to work through any disagreements and arrive at successful compromises.”

“We are hopeful that legislators and the gaming industry can all work together to ensure passage of a bill that benefits all three of these entities and the communities they serve.”

“We stand ready to do what we believe is in the best interests of the horse racing industry, employees, and shareholders and provide our full support to a sports betting bill that accomplishes this goal.”

With that as the backdrop, let’s take a look at what gaming executives said about prediction markets, and keep an eye on all the “I/we think,” “I/we expect,” and other qualifiers [bold mine].

Peter Jackson, Flutter CEO

“I've said this to people before, but it's worth reminding you, we do operate the world's largest sports betting exchange. So we know this space well.

“The Betfair Exchange has, for many years, given us very good insights in terms of how this stuff can play out. I think, it tells us that you've got to be quite thoughtful about how exciting the exchange product can be when you have a fully-fledged sports betting product available to you.

“We can see how important the Parlay mix is to a U.S. audience. And of course, you can't access that in the same way with something like the exchange. So we're very thoughtful about it, and particularly having seen so much success in terms of having the best product in the market. And I think that for existing states where sports betting is allowed, I'm not that confident that this will have a significant impact.”

The above is not exactly a ringing endorsement of the prediction market opportunity.

The following excerpt from the earnings call somehow spurred posts about FanDuel’s interest in launching prediction markets in states like California, Texas, and Florida, where sports betting is currently off-limits. That’s not how I read Jackson’s statements.

“But I think there are new markets, which could become available to customers in states where sports betting is already allowed. The political stuff is something that people talk about, and other gamified markets as well.

“So look, we're interested in the potential opportunity. We have brought some of our team who have experience in building these products and services from the Betfair Exchange business and put them into handle to help us evaluate the opportunity.

“Clearly, in states that haven't regulated, there's a sort of prime, the pump type of opportunity that is not that dissimilar to some of the DFS stuff, albeit it's worth remembering that DFS is a really good precursor to this Parlay product, whereas the prediction markets are quite limited.

“We're interested in potential opportunity. There's puts and takes [pros and cons]. And we're working our way through it.”

Jay Snowden, PENN Entertainment

“There's a lot going on right now in prediction markets as to federal regulations versus state-level regulations. It is interesting. It does exist, as you guys know, and has for a long time over in Europe. I think it is definitely more of a niche market for a variety of reasons.”

Again, sounds very similar to what Jackson said, as does the potential opportunity in these comments.

“I think it's largely incremental, especially if it's something that's being offered in states where online sports betting is not currently legal.

“So I think more to come on that. It's obviously not priority one for us. We've got a lot in front of us right now in terms of execution and delivering on guidance for the remainder of the year, and continuing to improve on all the areas that Aaron and Todd mentioned, both in interactive and retail.

“But we're staying close to it. And if this ends up being an opportunity for the industry, you should expect us to be participating.”

Jason Robbins, DraftKings

Updated to include comments from the DraftKings earnings call today.

Robins kept his comments short and sweet (not surprising given he spoke about them previously )when asked about prediction markets and any conversation DraftKings has had with lawmakers and tribes.

“It's definitely something that they're talking about. And it's early days, so it's hard to say at this point that it's really catalyzed anything because we haven't seen any states that are like, yes, we're going to do this now.

“But definitely, I think step 1, which, as you noted, is getting their attention and making them start having those conversations. We are seeing that happen. And I think as it continues to grow, that's just going to continue to be a powerful lever that this is happening, whether you want to or not.”

Robins went on to make the online casino argument (it’s already happening so you should get on board), saying, “So do you want to do it in a way that makes sense if you're a California tribe or if you're a state that hasn't legalized it yet that allows you to prosper? Or do you want to watch it happen somewhere else?”

What Are They Actually Saying

As Chris Grove noted on X, regarding Robins' previous comments on prediction markets, “This is very specific wording.”

And that’s the rub. When politicians or CEOs of gambling companies say something, every word matters, and every ‘think,’ ‘possible,’ ‘expect,’ and ‘potential’ should be noted. If two of those appear in the same sentence, be very wary.

Yes, a charitable reading of the statements could lead you down a path where these companies are chomping at the bit to get into the prediction market game, but I tend to focus on the throwaway lines, the things they don’t need to say that get tossed in.

Jackson and Snowden made a point to mention that prediction markets (as betting exchanges) aren’t new and are niche products when they are offered side-by-side with traditional sportsbooks.

Both also alluded to the opportunity in states that lack legal sports betting options, indicating that any substantial upside might have a short window.