Genius Sports reported a significant revenue increase of nearly 65% in the second quarter of this year, driven largely by commissions from microbetting. The company's overall revenue reached $195 million, with $117 million, or 60%, stemming from its betting technology segment.
Amid the surging interest in in-play betting, a lawsuit claims that Genius receives commissions on each microbet placed through platforms like DraftKings and FanDuel. Last year, this revenue source contributed $126.1 million to the company’s earnings. Although Genius did not provide specifics on microbet revenue in its Q2 report, it did indicate a 27.5% year-on-year growth in this segment.
After completing the acquisition of digital sports and gaming network Legend in February, Genius faced concerns from investors about the deal, which could cost up to $1.2 billion. This led to a substantial stock price drop of over 35%. Although the stock has since shown some recovery, currently valued at $7.83, it remains below its pre-acquisition price of around $8.54. The market response to the latest earnings release was mixed; while revenue saw a notable rise, the company's losses expanded as well. Genius reported a loss of $76.7 million this quarter, an increase from $53.9 million the same period last year. The acquisition of Legend primarily affected these losses, with operating losses improving from $80.7 million to $55.6 million.
Wells Fargo adjusted its rating on Genius stock from overweight to equal weight, highlighting the need for evidence that the acquisition will generate long-term value.
In light of the ongoing lawsuit, Genius's litigation expenses skyrocketed from $2.1 million to $28.9 million. The lawsuit asserts that Genius is implicated in promoting harmful microbetting. In its defense, the company stated that it operates as a responsible data provider for affiliates like FanDuel and DraftKings, mentioning past rulings indicating that sportsbooks do not owe a duty of care to compulsive gamblers. Genius argues that as a mere provider without direct customer relationships with gamers, it bears no liability.
In a move to further expand its partnerships, Genius recently announced collaborations with prediction market platforms Polymarket and Kalshi, where it will offer official real-time event data and league integrity services. Sean Conroy, EVP of Rights & Partnerships at Genius Sports, emphasized that robust integrity safeguards are critical as prediction markets develop, underscoring the company’s unique position in these partnerships. This collaboration includes providing live streaming services of Italy’s Serie A to Polymarket and supplying Kalshi with data from various soccer leagues, such as the English Premier League. However, the financial terms of these agreements remain undisclosed, leaving uncertainty about any commission structures similar to those allegedly in place for DraftKings and FanDuel.
