Caesars Eyes Sports Prediction Market If Legalized

Caesars Entertainment told analysts this week that the company is carefully watching the growing sports prediction market, ready to act if a legal path opens, without putting any of its state gaming licenses at risk.

The comments came during a call with Wall Street analysts, including Barry Jonas from Truist Securities. Jonas asked about competition from prediction markets like Kalshi, which offer sports event contracts regulated by the Commodities Futures Trading Commission. 

These markets have drawn attention from both investors and regulators, and traditional sports betting operators have faced lawsuits from states and tribal nations over concerns about lost revenue.

“We Can’t Be Out On the Lead”

“We’re actively watching it and as we said before, we can’t be out on the lead on this,” said Eric Hession, president of Caesars Sports and Online. 

“We’re going to monitor it, so we’re not left behind if there’s regulatory clarity and that we have a good plan in place should that outcome happen.” Hession specifically noted warnings from Nevada and other states that licensed operators should steer clear of prediction markets for now.

Caesars CEO Tom Reeg echoed the cautious approach, saying the company sees the potential in prediction markets but will only enter if it’s fully legal and won’t endanger its licenses. 

“We will not put any of our licenses at risk,” Reeg said. “We believe what’s happening in prediction markets is sports gambling. If a path develops where we can participate safely, we are prepared to go down that path. We’re watching it the same as you are.”

So far, Hession said Caesars hasn’t seen much impact from prediction markets, noting that most of their volume likely comes from states without legalized sports betting or younger players aged 18 to 21.

Strong Online Operations

On the financial side, Caesars’ digital operations remain strong despite some headwinds. Jonas noted that third-quarter EBITDA was $28 million, down $24 million year-over-year, largely due to the World Series of Poker sale, lower NFL hold in September, and increased costs tied to higher iGaming volumes, including taxes and platform fees.

Still, online sports betting handle grew 6% and iGaming revenue rose 29% in the quarter. Caesars is preparing to launch a redesigned Horseshoe online casino in Q4. 

Management expects digital revenue to drive roughly 20% top-line growth, with about 50% flowing through to EBITDA, supporting the company’s $500 million EBITDA target.

While spinning off the digital business has been discussed, analysts don’t expect moves in the near term, as the online sports betting market remains volatile and Caesars continues to ramp up toward its financial targets.