Interview with analyst David Katz; Prediction products are a difficult, narrow space

Katz also places today’s strategic choices in the context of the industry’s recent history. He notes that gambling has long taken multiple forms — from racing and mechanical games to regional sweepstakes — but that, as he puts it, “the digital gambling/gaming came out of Covid,” when physical venues were constrained, and operators rushed online.

In that phase, he says, “the only strategy was let’s get the door open,” and many digital efforts went ahead without a clearly defined value proposition behind them.
He argues that the question now is less about novelty and more about substance: which business models have clear value for customers, which management teams can execute through what he calls a “strange economy,” and which strategies sit on solid regulatory ground.

Against that backdrop, Katz does not see prediction products as the sector’s next growth engine; instead, he frames them as a fragile niche facing strong political, commercial, and legal headwinds.

Why Katz doubts prediction products

Tribal casinos remain powerful stakeholders whose economic and political influence shapes how new gambling‑adjacent products, including prediction markets, can develop in key U.S. states. Image © Surdin Photography / Alamy

Two opportunity sets: U.S. land‑based + digital, and regulated Latin America

Instead of prediction products, Katz emphasises two main opportunity sets that, in his view, offer more durable upside. The first is in the United States, where land‑based casino groups are “rewriting their proposition” and partnering with digital operators in regulated environments. He believes the future lies with companies that reinvent their properties into places people actively want to visit, and that connect those destinations to digital through loyalty, data and content.

He points to Boyd Gaming Corporation and Penn Entertainment as examples of this direction of travel. These companies, he says, are not “doing every single thing right”, but they are “doing a lot of the right things”: investing to refresh properties, building non‑gaming amenities and tying on‑property experiences to online betting and iGaming through shared systems and offers.

To explain the challenge, Katz compares casinos to shopping malls — physical destinations that must continually develop and reinvent the customer experience to compete with digital alternatives and changing habits.

The second opportunity set Katz highlights is digital operators growing in newly regulated markets in Latin America. Here, the focus is on companies that stick to clearly legalised sports betting and iGaming, expanding country by country as frameworks solidify rather than chasing loosely defined products. Rush Street Interactive (RSI), for example, is for him an illustration of a “stay in the regulated lane” strategy: an iGaming operator focused on licensed U.S. markets and on regulated Latin American jurisdictions, avoiding prediction products and instead building out in places like Colombia and other regulated countries.

Across both these opportunity sets, Katz stresses that what matters is not just the channel — land‑based or digital — but the combination of regulation, management, and value proposition. He favours models in which land‑based assets and digital channels reinforce each other, and in which expansion into new markets is grounded in clear rules and regulations.

Land‑based casinos are reinventing properties and tying on‑property experiences to online betting and iGaming, while regulated digital operators expand across the Americas.

Three reasons he doubts prediction markets’ longevity

Katz summarises his scepticism about prediction markets around three core factors, where he believes that at least two are often under‑appreciated in the debate.

First, he thinks the political and economic power of tribal gaming entities is “frequently underestimated”. Tribal casinos generate substantial revenues and hold dominant positions in several large U.S. gaming states, and their compacts and lobbying strength give them significant influence over whether and how new gambling‑adjacent products can develop.

Second, Katz emphasises that major sports teams and leagues want clearly regulated gambling markets. In his telling, leagues expect operators to report quickly when something is wrong and want new products to fit within existing integrity monitoring, suspicious‑bet reporting, and consumer‑protection frameworks rather than sit outside them. Prediction products that launch with lighter visible safeguards or try to position themselves as non‑gambling “trading” tools risk clashing with those expectations.

Third, he points to ongoing lawsuits and legal challenges around prediction markets as another layer of uncertainty that undermines their long‑term prospects. For Katz, this mix of tribal influence, league and team preferences, and active litigation means the legal and political ground under prediction products remains unsettled — not the kind of stable foundation he looks for when identifying long‑term winners.

FanDuel vs DraftKings: why he favours caution

When the conversation turns to the contrasting approaches of FanDuel and DraftKings, Katz makes clear that he prefers FanDuel’s more cautious strategy in prediction products. FanDuel’s prediction vertical has, as he notes, so far been launched only in a small number of U.S. states, and specifically in states where traditional online sportsbooks are not available and where tribal entities are not directly in play. For him, that kind of limited, incremental rollout — in jurisdictions less entangled with existing sportsbook and tribal compacts — offers a more defensible risk‑reward profile for a large, trusted brand.

By contrast, DraftKings is widely seen in the market as taking a more offensive stance toward prediction products, as part of a broader effort to expand its total addressable market. Katz does not dismiss the strategic logic of seeking new revenue streams, but he remains unconvinced that prediction markets, given the structural headwinds he outlines, will emerge as a dependable engine of long‑term growth.

RSI and the question of brand risk

Asked whether moving into prediction markets could dilute the value of a trusted iGaming brand, Katz offers Rush Street Interactive, Inc. (RSI) as a counter‑example. RSI, as described, is a regulated online casino and sports‑betting company focused on legal markets in the United States, Canada, and Latin America, operating brands such as BetRivers, PlaySugarHouse, and RushBet in multiple U.S. states and in countries including Colombia, Mexico, and Peru.

Rather than experimenting with prediction products, RSI is, in his view, concentrating on improving profitability and expanding into fully regulated markets where licensing, consumer protections, and political support are clearer. Katz presents this as a strategic choice: double down on clear regulatory frameworks and omnichannel growth, or “wander into” a prediction‑market space where legal status, consumer protections and stakeholder backing remain unsettled. His sympathies clearly lie with the former.

Digital’s Covid inflection and why management matters more than ever

Katz returns several times to the way Covid reshaped gambling. He notes that while online sports betting and iCasino began after PASPA was overturned, the pandemic accelerated digital adoption by forcing both consumers and policymakers to embrace online channels while physical casinos were shut or constrained. For him, that period was about “opening the door” to digital as quickly as possible; the task now is to refine the value proposition and integrate digital and land‑based in ways that truly serve customers.

All of this is playing out, he says, in a “strange economy” and an uncertain market. In such conditions, “thinking of stocks in this economy based only on the economy” feels to him like “a fool’s errand”; instead, he argues that investors should focus on management teams, business models and growth, and on whether companies are building coherent, customer‑centric propositions. Through that lens, Katz continues to favour operators where land‑based assets and digital channels reinforce each other and where expansion into new markets is clearly regulated — and to treat prediction products as, at best, a small optional extra rather than the core of the story.