Michael Burry made his name betting against something everyone else believed in. Now he is doing it again, this time buying into sports-betting companies Flutter Entertainment and DraftKings at a moment when both stocks are badly wounded, and arguing the thing that wounded them will not last.

Burry disclosed on Wednesday that he bought Flutter shares at roughly $107 each and DraftKings shares in the low $26s. The two positions together make up a single full-sized allocation, weighted about 60 percent toward Flutter, though Burry said he may eventually make each a standalone full position.

Flutter's stock has fallen roughly 50 percent this year. DraftKings is down about 21 percent. The culprit, in Burry's telling, is prediction markets.

What prediction markets actually are

Prediction markets let people buy and sell contracts tied to the outcome of future events: sports results, elections, economic releases. They have grown rapidly because they operate under federal oversight from the Commodity Futures Trading Commission rather than under state gambling regulators. That distinction matters enormously to the bottom line. State-licensed sportsbooks like DraftKings and Flutter's FanDuel pay significant state gaming taxes on every bet placed. Prediction market platforms, operating under a federal framework that was designed for financial derivatives, largely avoid those taxes.

That is the loophole Burry is betting against.

"I believe that the political climate will not tolerate this," he wrote on his website. His argument is that it is only a matter of time before Congress or regulators close the gap, forcing prediction markets into the same tax and regulatory structure that licensed sportsbooks already occupy. If that happens, the cost advantage that has been pulling customers and attention away from DraftKings and Flutter would largely disappear.

Why the timing matters

Burry is making a regulatory prediction, not just a business one. He is arguing that a legal arbitrage this visible and this lucrative will eventually attract enough political attention to get shut down. It is a plausible thesis. Prediction markets have drawn scrutiny from state attorneys general, gambling industry lobbying groups, and members of Congress who view them as a backdoor to online gambling without the tax revenue that gambling is supposed to generate for states.

Whether the crackdown comes quickly enough to matter for shareholders is the real question. Flutter, despite its stock drop, is described by Burry as a strong underlying business that has suffered from past capital misallocation rather than structural decline. DraftKings, he argues, is improving as an operating business right now.

Both companies have scale. Flutter operates FanDuel, the largest sportsbook in the United States by market share. DraftKings is its closest rival. If prediction markets are eventually reined in, the customers and volume that migrated toward those platforms would have the fewest alternatives outside the established licensed operators.

The trade is essentially a bet that the regulatory status quo is temporarily broken rather than permanently changed. Burry is buying the companies that lose if broken stays broken, and win if someone fixes it.

That framing carries real risk. Regulatory timelines are notoriously hard to forecast. The loophole has existed long enough that political inertia and lobbying have kept it open, and there is no guarantee Washington acts on any particular schedule. Investors who bought either stock a year ago on similar logic have spent twelve months being wrong about that timing while watching their positions fall.

Burry is entering lower. Whether that is enough margin of safety depends on how long "eventually" turns out to be.