Gaming / Gambling

European gambling regulators have warned that prediction markets are operating like sportsbooks while avoiding gambling licensing, taxation and responsible gambling requirements. The warning follows growing regulatory scrutiny across Europe, with France and Spain acting against prediction market platforms and regulators in Germany, Ireland and other markets questioning whether these products constitute unlicensed gambling.

We believe these latest warnings as positive for traditional gambling operators as it increases the likelihood that prediction markets will face stricter regulation, licensing requirements or further geo-blocking across Europe. This also highlights the growing divergence between the US, where prediction markets continue to expand, and Europe, where regulators are increasingly treating them as gambling products rather than financial instruments.

Expert Opinion:
This is good news for Entain and Flutter. This is also potentially favorable for FDJ, even though it is far less sensitive. Indeed, in France, gaming gains are not taxed, whereas capital gains on financial instruments are. Therefore, in France, the success of these is very limited. The sector's decline has been massive over the last couple of years due to increased taxation. We believe this is now priced in, and we have a positive stance on the sector. Valuation for both Flutter and Entain looks especially appealing on the PE metric. 

We still very much like FDJ, with a dividend yield of c10% and a dividend we believe isn't at risk (unless there is a massive change in the tax structure applied to the company in France).


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