Gaming Gambling

Shares of Entain (+8%) and Flutter Entertainment (+4%) rose yesterday following reports that bipartisan US senators plan to introduce the ‘Prediction Markets Are Gambling Act’, which would ban prediction-market platforms such as Kalshi and Polymarket from offering sports-event contracts. The proposal is viewed as supportive for licensed sportsbook operators, as prediction markets have been emerging as a competitive threat, particularly in the US market.

We view this development as positive for operators, particularly Flutter via FanDuel and Entain through BetMGM, as restricting alternative betting formats could help protect market share and margins, reinforcing our positive stance on both stocks. However, the legislative process remains at an early stage, and implementation risk remains a key uncertainty.

The concerns on prediction betting had a massive drag on those share performances and both are trading buys in our opinion. Entain is back to very attractive level and despite yesterday's rise, we would buy the shares here to play a bounce on the name. Stock trades at very attractive valuation levels and despite the risk that this legislation could not be passed, I believe the risk reward at current level is very compelling. We have a buy rating on Flutter (higher quality name) and an Add rating on Entain. Note that the discount between both has significantly narrowed, but Entain remains a cheaper option at this stage.