EGR: The prediction markets space exploded in 2025, but who do you think will come out on top in the end?
Matt Davey (MD): If it’s who captures the most turnover, it’s hard to look past Robinhood. They were a left-of-field entry into the market, but they are just incredibly clever with their product-set. They already have an enormous consumer base for the rest of their financial products. From our market checks, there’s a lot of folks who have never heard of Kalshi. Everyone in our industry has heard of them, but in the broader marketplace there’s a lack of awareness. That takes time.
EGR: How do you expect DraftKings Predictions and FanDuel Predicts to fare?
MD: They obviously understand the consumer, and they have well-developed and experienced marketing teams. So, I think they’ll be very viable as competitors. The real question is will the state-based regulators – even though they’re not offering sports event prediction markets in those states – lean on them to prevent them from being as aggressive as possible in the markets where they’re not licensed as a sportsbook, with the upshot being a more restricted product. Ultimately, it comes down to liquidity. The market makers will determine which platform wins.
EGR: Kalshi announced a Series E funding round in December, taking its valuation to $11bn. Two months prior, Polymarket hit $9bn, after its latest investment (up to $2bn) from Intercontinental Exchange (ICE). Are these valuations justified?
MD: You inevitably see really high valuations for fast-growing tech businesses. Both Kalshi and Polymarket tick that box. I think it’s typical, as sports betting and igaming stakeholders, to see everything through our lens, but ICE is on record saying they didn’t invest in Polymarket just for sports betting. They think it’s a great prediction markets product right across economic events, political events, etc, and there’s a real mood, particularly among the younger cohort of investors, to want to have exposure to these types of products.
So, it’s not just all about sports events, I wouldn’t be shocked to see valuations come down if these companies go public at some point, and you can see the real economics come through. At this stage, the private markets are valuing them on very high multiples of revenue, and we’ll see if they can back it up with the profitability to underwrite that in the future. Given what we know of exchange businesses, my sense is it’s going to be difficult for everyone outside the market leader.
EGR: How much rests on where prediction markets end up from a legal perspective?
MD: Our view is it will ultimately head to the US Supreme Court for a final say. It’s most likely prediction markets survive that review but perhaps with guardrails around what you can and cannot do. If there’s a limited product set, can existing regulated sports betting operators engage in that with the blessing of their state-based regulators? That’s a key fulcrum to determine where we end up.
At one extreme, all the sports betting operators that don’t own land-based properties could give up their sports betting licences and go all in on prediction markets. And on the other side, you can see everyone who’s got an OSB licence getting out of prediction markets. I don’t think either of those extremes will happen, but there could be a hybrid position if prediction markets survive political review.
EGR: Do you think the rise of prediction markets in the US will persuade some remaining states to legalise sports betting?
MD: Our view is that sports betting and gaming is a privilege not a right. We think the correct infrastructure should be either state or federal regulation. If there was to be a benefit of prediction markets, it’s to demonstrate that consumers have a choice, and they will move to the areas of lowest friction and highest entertainment. So, state-based regulators could step back and look at what they need to do to make sure their regulatory environment attracts the best products for the consumer. And that’s going to be a mix of the tax rate and balancing the AML and KYC aspects to make sure you’ve got a vibrant, strong and healthy local, state-based market.
If that happens then great. Prediction markets would have helped create a healthier environment for everybody, from the perspective of consumers, the states and operators. Typically, that doesn’t happen. It’s very hard to take a whole-of-market view, certainly at a state level. My sense is some states will adopt customer-centric policies, but many will just rail against this and hope they can rattle the cage enough to keep operators in their respective state out of prediction markets and continue to collect gaming taxes.
EGR: Turning to M&A, last year Betclic owner Banijay Group swooped for Tipico, Intralot acquired Bally’s online assets outside of North America and Allwyn announced its merger with subsidiary OPAP to create a lottery and igaming powerhouse. Do you expect consolidation to continue in 2026?
MD: I do. The reason for consolidation is as tax rates around the world tend to increase and, consequently, the operating margins come under pressure for standalone operators. So, you gain significant benefits through scale, both in marketing dollars and the cost of technology you invest in every year. We expect the trend of diversified, multinational operators to grow larger. It’s going to continue, certainly over the next decade or two.
Flutter is probably the best example of that. You start out the leader in one market and you leverage that by either entering new markets organically or through the acquisition of domestic heroes. I think that playbook is what we’ll see others do. Africa, Latin America, Eastern Europe, for instance, you’ll continue to see expansion and consolidation because the industrial logic behind being a fully scaled, multinational sports betting and gaming operation is really strong. The public markets will continue to support that as well.
EGR: What’s the environment like right now for raising capital to fuel organic growth and/or M&A?
MD: Good question. There’s still capital for new entrants to raise seed money, but it’s more difficult for those through Series A to C funding rounds. The betting and gaming industry is fairly small – the number of companies worth over $1bn is quite small compared to other sectors. Venture capital is about the power law where you get extreme outcomes, and this is harder to effect in this industry. When a company is public, it typically trades at between 5x and 8x EBITDA, so it’s hard for investors to get excited when you can buy Alphabet or Microsoft and others that have probably the same growth rate but a much higher chance of being worth 15x or greater in the public market.
The other aspect that makes it hard is the limited subset of investors that can invest in sports betting and gaming. There’s a lot of ESG restrictions for a large number of funds, and the size of the companies is typically on the smaller end of the curve. So, the big investors that can invest really can’t put that money to work. I do think it remains a capital-constrained industry. We tend to see the larger deals being executed by strategics operators, not by financial investors.
EGR: Evoke announced in December its board had initiated a strategic review that could result in a full sale of the group or certain assets sold off. What’s your opinion on the future of the parent company of William Hill, 888 and Mr Green?
MD: These are very storied brands – 888 in the online space and William Hill is obviously part of the fabric of the UK leisure and entertainment market. The problem here is you have an upside-down balance sheet, and balance sheets are tricky to fix, particularly in an environment of increasing tax rates, so profitability and cash flow is constrained. They’re particularly hard to fix when you’re in the public market and having to provide quarterly and semi-annual updates to the market.
I think they’re going to go through a period of pain, and it’s the equity investors that will probably experience the most pain, but no doubt the debt providers will also likely take a bit of a haircut. There’s no doubt that the underlying assets have value, but it’s difficult to see how you get to that value with the current balance sheet. My sense is there’s a restructuring coming down the pipeline – they’ve probably done very well to put it off for as long as they have, but at some point you have to pay the ferryman.
EGR: Is a breakup of the business more likely outcome?
MD: The easiest and cleanest option is to go private and do a restructure. Doing that via an LSE-listed asset is difficult, so there is the potential to carve out and sell off some of the furniture inside the house. If I was management, going private is what I’d be focused on. But the debt guys really are in control here. From the outside looking in, I’d say privatisation first, an asset sale second.
EGR: There was speculation last year that bet365’s owners were mulling a sale of the privately owned group – though nothing materialised. Can you see something happening in 2026?
MD: I’ll talk in hypotheticals, but it’s a beautiful business and highly cash generative. You really have your choice as to how long you want to stay earning with that business or when you want to sell. Typically, owners of these types of assets want to sell when they feel the market is frothy and investors are prepared to pay a really high premium. My sense is that period probably passed last year and premiums have come off. Not because of anything bet365 has done but because of the impact of prediction markets and the sentiment around that. That takes the froth off the table, which more likely means a sensible deal at a sensible price.
Then it’s a question of whether that’s what the current ownership wants or are they happy to continue to run a highly profitable business? That’s a roundabout way of saying there is no real driver at this point to force a sale. It really comes down to what the owners want to do, and my sense is they’ll continue to happily own that asset for as long as they like – unless someone offers something compelling, though it’s hard to see that happening this year.
EGR: Is an acquirer more likely to be private equity, as opposed to from the limited pool of operators that could fund a transaction of this magnitude?
MD: There are a lot of aspects to the structure and setup at bet365 that lends itself better to private equity, particularly given private equity can bring together other assets and take them public at some point in the future. We like this setup the most. But that said, it’s an incredible asset. It’s probably a one-in-million asset that would be attractive to a large number of strategics, but it’s hard to see how they get the capital necessary to execute on this. So, we come back to private equity having the deepest pockets and the ability to execute well.
EGR: Could DraftKings manage it?
MD: DraftKings have the ambition and chutzpah to pull off a transaction like that, but I don’t think that’s their primary focus today.
The post Tekkorp Capital’s Matt Davey: Market makers will determine who wins prediction markets arms race first appeared on EGR Intel.
Advisory and investment firm’s founder and chair also provides his thoughts on evoke’s strategic review, what bet365 could do next and why this remains a “capital-constrained industry”
The post Tekkorp Capital’s Matt Davey: Market makers will determine who wins prediction markets arms race first appeared on EGR Intel.