DraftKings and Flutter Entertainment shares caught a sudden tailwind on Wednesday after The Big Short visionary Michael Burry revealed he is backing the biggest names in sports betting.

The legendary contrarian investor disclosed his new stakes in a post on his Cassandra Unchained Substack newsletter. The announcement sent shares of DraftKings (NASDAQ: DKNG) and Flutter (NYSE: FLUT) spiking to session highs before settling into more modest gains of 0.5% and 1%, respectively.

Burry’s entry into the space isn’t a speculative play on sports outcomes; it’s a structural bet on business maturation.

"DraftKings is inflecting as an operating business and the value is in the transition I foresee in the near future. Flutter has been hurt by capital misallocation in the past, but is a fundamentally very good operating business with terrific scale." — Michael Burry

Burry explicitly addressed the anxiety gripping traditional sportsbook investors: the explosive rise of political and alternative prediction markets. While some fear these new platforms will cannibalize sportsbooks, Burry views them as structural paper tigers.

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  The Regulatory Hammer: Burry argues that the political climate will not tolerate prediction markets in their current, wild-west format.

  
  


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  The Loophole Economy: "Prediction markets exist in a loophole adjacent to a heavily regulated and taxed industry," Burry warned. "In time, prediction markets will be subsumed into regulation and taxation."

  
  

The Takeaway: Once prediction markets face the same crushing tax rates and compliance burdens as DraftKings and Flutter, their perceived competitive edge evaporated.

Also in the Note: In the same update, Burry revealed he isn’t entirely abandoning his e-commerce plays, disclosing that he has added to his existing position in Chinese tech giant JD.com (NASDAQ: JD).