00:03 Speaker A
Sports betting stocks under pressure over the last month or so as prediction markets gained a lot of attention from investors, seeing their valuations balloon in a few short months. The New York Times reporting Friday that Kashi raised $300 million at a $5 billion valuation. This after Polymarket got a $2 billion investment from the owner of the NYSE at an $8 billion valuation. Here to discuss the risks to sports better from these prediction markets is Jed Kelly, Oppenheimer managing director for equity research for consumer Internet companies including the sports betting companies. Jed, thanks for being here.
00:46 Jed Kelly
Thanks for having me.
00:47 Speaker A
So, there is this really interesting dynamic that is developing here between the more established sports betting companies and the prediction market companies, although of course there’s some overlap because some of the sports betting companies have prediction markets uh aspects also. But how do you sort of think of the two sides and what the competitive landscape is going to look like?
01:13 Jed Kelly
Yeah, you know, at its core, I think they’re offering two different products. I think if you look at your traditional sports bet books, you know, fanDuel and DraftKings, they offer better a lot of markets, more options. and then when you start to look at the prediction markets,shi and Polymarkets, Polymarket, their offerings are a little bit more limited. and the other difference is is obviously Polymarket and and Kalshi, they’re they’re they’re they’re litigated for now under the CFTC, so they’re offering this at a federal level. I think what happens is what happens to the legality? Will prediction markets be available for everybody under sports in six months or to 12 months or, you know, will some of these state lawsuits like we’re seeing in Nevada, Maryland or or Massachusetts and California with the tribes gain some steam?
02:18 Speaker A
In other words, that even though now prediction markets are available nationwide because they are overseen by the CFTC, that might not be the case, you know, six months from now or whenever these these lawsuits proceed.
02:34 Jed Kelly
Correct, because what what Kashi’s using right now is that under the CFTC, you can’t do gaming. However, they’re they’re saying sports isn’t part of gaming. The states think they control gaming, right? So you have this dichotomy breaking out on what will ultimately prevail. I think general consensus right now among investors we speak to is Kashi and Polymarket are able to offer sports contracts for the next three years. Something could happen sooner. It it’s it’s hard it’s hard to uh predict. Um, right now, I mean, interestingly enough, Polymarket right now, you you can take a for has, you know, at 40%, sport contracts might not be available under the CFTC by year end. So there’s a lot of moving pieces. I think for investors in DraftKings and Flutter, the stocks mostly are are probably down more on not hitting their September target holds. I think if September had come in line with expectations, these stocks would be closer to where they were trading, you know, right before Labor day. So I think it just is creating a lot of noise. I haven’t seen any, we haven’t seen anything from a product, a pricing perspective that would that would get us to think they would take share. At the end of the day, they’re more likely, you know, different products. And I’m sure when, you know, um, the VCs and uh, Ice made their investments in Polymarket and Kalshi, you know, their hope is 5, 10 years down the road, sports is a less part of their business.
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