Prediction markets aren’t taking a piece of the pie away from the most lucrative sports betting and iGaming operator in the U.S., according to the company’s top executive.
Key Takeaways
- Flutter’s Peter Jackson says parlay products “are more exciting and engaging” than prediction markets.
- FanDuel’s priority is maintaining regulatory relationships over entering the contract outcome industry.
- Flutter executives aren’t pleased with Illinois’ per-wager tax.
Peter Jackson, CEO of Flutter Entertainment, said its American arm, FanDuel, has not been impacted in its current operating states by sites that offer sports outcome contracts, like federally regulated Kalshi, which is available in every jurisdiction.
According to Jackson, there’s one major revenue-generating difference that keeps FanDuel’s customers coming back.
“Parlay products are much more exciting and engaging,” Jackson said during a post-earnings fireside chat Wednesday. “You just can’t have the huge set of permutations and combinations that come out of having a proper parlay (market) that aren’t available on prediction markets.”
Prediction platforms typically offer only two outcomes (Yes or No) on sports markets, whereas FanDuel’s players can place multiple wagering legs together for higher odds, even on same-game markets.
Regulatory compliance
That doesn’t mean FanDuel isn’t interested in entering the prediction space. A report surfaced in June that the Flutter-owned operator was looking into a partnership of some kind with Kalshi, the leader in prediction platforms. Jackson has also previously stated the gaming company is interested in the opportunity.
However, FanDuel is regulated on a per-state basis, with each jurisdiction providing different laws and operating rules. Flutter is not willing to risk hurting that structure at this time and would have no issue entering the prediction industry quickly if regulation isn’t an obstacle.
“This is not complicated,” Jackson said about putting together a prediction platform. “The complexity here is managing regulatory relationships and stakeholders. When you think about what our primary goal is, it’s about getting to as many states. We can’t let what’s happening in the prediction markets upset that.”
Strong quarter
Alongside Flutter CFO Rob Coldrake, the executive duo also discussed the latest successful three-month period, during which FanDuel alone generated a second-quarter record of $1.79 billion.
The top U.S. operator also reported $400 million in adjusted earnings as well as a 22.5% EBITDA margin. Continued product innovation and operator-friendly results led to the 17% year-over-year quarterly increase.
Jackson pointed to FanDuel’s new tennis same-game parlay product that did well during the French Open and Wimbledon, and he’s excited to see where it goes during the upcoming US Open.
“I think that the fact that we continue to see growth, even in the oldest states from a sportsbook perspective, in the pre-2022 states, is very encouraging,” Coldrake said.
Flutter was also pleasantly surprised by the increased revenue from iGaming, which reached $507 million in Q2. Coldrake also pointed to revenue growth in Italy and Turkey on the international side.
“It was a strong set of results,” Jackson said. “I think it shows the compelling fundamentals of the business. Market reaction was not quite what we anticipated.”
Football is coming
Flutter executives feel like the gaming company is in a solid position heading into the busiest period of the sports calendar. Jackson said U.S. football “stops the nation,” and FanDuel is poised for more growth.
“We’re very excited about the forthcoming football season, Jackson said. “It’s always a roller-coaster ride when football season gets going. We’ve got some exciting products for customers. We would anticipate that we will continue to grow our parlay penetration backed by changes we’re making.”
Tax issues
The Flutter executives described the per-wager tax on online sportsbooks in Illinois as “very disappointing.” FanDuel will be charging a 50-cent transaction fee on all bets placed by Illinois residents to combat the rise in an already high tax-rate state.
Coldrake believes the Prairie State’s per-wager tax is an outlier and “doesn’t align with what other states are doing.” That said, Flutter has been working with state lawmakers to educate them on the effects of high operator rates on state tax revenue.
“We’ve made quite a significant investment into our regulatory affairs,” Coldrake said. “It’s no coincidence that some of the tax bills were moderated and went away. Even the ones we’ve seen come through in New Jersey and Louisiana were lower rates than initially built. We had some influence in some of those conversations.”
Flutter is also bracing for potential tax changes in the U.K. The company’s executives believe their global model has them prepared.
“We’ll continue to see changes, but we’re quite comfortable with our position,” Coldrake said.
