Genius Sports chief executive Mark Locke told shareholders on 14 September that the demand created by prediction markets will outlast the platforms’ current structure, and that Genius earns at least as much from that activity as it does from sportsbooks.
The letter comes as US states move against sports event contracts and federal appeal courts remain split on who regulates them. Locke’s position is that Genius gets paid whichever way the legal fight ends.
“Americans are going to keep wagering on sports, and Genius will be paid however they do it,” Locke wrote.
Three revenue lines from one wager
Locke set out three ways Genius takes revenue from prediction markets. It sells official data, settlement and integrity services to the platforms, a client list he said includes DraftKings, FanDuel, Kalshi and Polymarket. It sells data and pricing to the market makers that provide liquidity on the exchanges. It also sells customer acquisition through Legend, the media business Genius bought for $1.2bn earlier this year, and its wider media platform.
On that basis, Locke wrote that “the economics to Genius from a comparable dollar of prediction market activity match or exceed those generated through a sportsbook.” His reasoning: exchanges keep less revenue per dollar than sportsbooks, market makers take the spread, and Genius sells data to both the exchange and the market maker.
Genius signed official data agreements with Kalshi and Polymarket in early August. The Kalshi deal covers the Genius official soccer data portfolio, media and integrity services. The Polymarket deal covers official data, streaming and integrity services for selected US competitions.
Locke compared the model with how Genius already works in regulated sports betting.
“Supplying rivals is how we have always worked: DraftKings and FanDuel compete for the same customer yet both buy from us,” he wrote.
Locke expects the current platforms to change
Locke wrote that “the prediction markets of today are very unlikely to look like the prediction markets of tomorrow” and that “some current advantages will disappear, and today’s winners may not be tomorrow’s.”
He pointed to tax and rulemaking already under way. North Carolina taxes exchanges’ net trading-fee revenue, Illinois has added a transaction levy, and the Commodity Futures Trading Commission (CFTC) is writing its framework for event contracts.
Locke also cited Flutter, which describes FanDuel Predicts as a way to acquire customers ahead of state regulation, “with incremental economics in the meantime.” Sportsbooks and exchanges are chasing the same users. Polymarket signed LeBron James after his DraftKings deal expired, its first individual NBA partnership.
Settlement errors and official data
Locke argued that the settlement standards regulators are now writing will raise the value of official data. His example was the Western Michigan at Michigan college football game on 5 September.
According to the letter, Kalshi settled the market as a Western Michigan win when the broadcast clock reached zero. Officials then restored one second, Michigan scored on the replayed Hail Mary, and Kalshi clawed back and re-paid what Locke described as an estimated $18.6m market.
The Genius agreement with Kalshi covers soccer. The letter does not say Genius supplied the data for that football market.
State enforcement reaches suppliers
On 10 September, Connecticut’s Department of Consumer Protection (DCP) ordered nine prediction markets, including Polymarket, Coinbase and Robinhood, to stop offering sports event contracts to state residents. The DCP issued close to 30 subpoenas at the same time. The governor’s office listed Genius Sports Media and Genius Tech International among the nine licensed gaming service providers that received one. The DCP said subpoena recipients are not under investigation.
The courts are divided on the core question. The Third Circuit ruled for Kalshi in April, and the Ninth Circuit later ruled that Nevada can regulate Kalshi’s sports event contracts under state gaming law. Kalshi has also appealed a Connecticut federal court ruling to the Second Circuit.
What comes next for Genius
Locke’s case depends on wagering volume holding up whatever the product. “Increases in wagering volumes support the demand for Genius products, irrespective of the form that wagering takes,” he wrote.
The next tests are the Second Circuit decision on Connecticut, the final CFTC framework and what state regulators ask data suppliers to hand over. If states push sports contracts off the exchanges, Genius still sells to DraftKings and FanDuel. If exchanges keep growing, Locke says Genius earns the same or more per dollar. The letter gave no figure for the revenue Genius currently takes from prediction market clients.
Source: Genius Sports, Connecticut Department of Consumer Protection
