Sportradar detailed its strategic expansion into the U.S. predictions market during its Q2 earnings call on Monday, elaborating on recent partnerships with Kalshi and Polymarket. Despite enthusiasm about the potential in this sector, the company warned that regulatory uncertainties in the U.S. and delays in closing contracts might push significant financial gains to 2027 and later.
CEO Carsten Koerl emphasized the considerable commercial advantages of exclusive partnerships with prediction-market operators. He noted that these ventures would enhance Sportradar's target addressable market and diversify its traditional sportsbook clientele. "With our premium content, global scale, and unmatched product portfolio and capabilities, predictions market is a natural adjacency," he stated. Koerl added that this expansion increases the U.S. addressable market by opening new states, attracting more players, and enhancing sports engagement.
While Koerl and CFO Craig Felenstein were reserved with specifics about the deals with Kalshi and Polymarket, Koerl drew connections to Sportradar's existing online sports betting operations, mentioning opportunities to collaborate with key players in the prediction market ecosystem, including brokers, market makers, and exchanges.
Sportradar's partnership with Kalshi, established in June, includes a multi-year global agreement to provide real-time data for trade settlement, customer acquisition, fan engagement, and integrity services for major sports leagues like the MLB, NHL, and UFC. This contract features various commercial components, enabling Sportradar to benefit from potential volume growth. Koerl noted at the time, prediction markets represent a promising growth engine, positioning Sportradar uniquely to influence this emerging sector.
From March to May, the revenue from Sportradar's marketing and media services segment climbed 16%, propelled by strong spending from the prediction market industry. Analyst Jordan Bender from Citizens posted in a research note that this trend is set to continue in the latter half of the year, especially as financially robust companies enter the space during the NHL and NBA seasons.
Bender also raised the company's EBITDA margin estimate for 2026 to 25.1%, up from 23.7%, suggesting a positive outlook for prediction markets in the long run. On the same day, Sportradar secured a multi-year deal with Polymarket to provide Tennis Data Innovations (TDI) data, giving registered Polymarket users access to live coverage of approximately 20,000 matches each season, inclusive of streaming and exclusive event contracts.
During the Q2 call, Felenstein clarified how the deal terms with prediction markets differ from traditional sportsbooks. He highlighted a model with both fixed and variable fee components, tailored to capture growth as the market expands.
Koerl expressed optimism about finding the right operational framework, saying, "Here, latency is key and centre. Deep data is key and centre. That gives new revenue opportunities." Sportradar is focusing on expanding its ultra-low-latency feeds and advanced data capabilities as competitive advantages in the prediction markets.
Management expects revenue from prediction markets to reach tens of millions by 2026, despite the current delay in contract signings affecting Q2 earnings. The segment is projected to help boost full-year 2026 revenue by 19% to 21%, with estimates placing total revenue between €1.518 billion and €1.533 billion.
Koerl acknowledged that prolonged negotiations and delayed league approvals had hindered revenue realization, stating, "We were ready for [prediction markets] to go at the end of the first quarter call." He explained that delays stemmed partly from awaiting approvals from league partners.
Sportradar's stock has faced pressure amid uncertainties about prediction markets and allegations from short-sellers, which the company has denied. Following a drop in April, Sportradar shares finished Monday at $12.91 and shifted slightly to $12.73 in mid-day Thursday trading. Citizens adjusted its price target from $24 to $20 while maintaining a "market outperform" rating.
Kalshi, which recently commenced offering political-event contracts, reported a trading volume of $245 million on Election Day, contributing to a monthly total exceeding $1 billion. Regulatory positions concerning prediction markets have fluctuated, particularly during the Biden administration that proposed a ban on certain contracts, contrasted by a Trump administration that endorsed regulatory jurisdiction by the CFTC. Numerous states are involved in litigation against Kalshi and Polymarket, while a bipartisan group of 44 attorneys general opposes federal interference.
The ongoing legal disputes were underscored by a recent lawsuit filed by New York Governor Kathy Hochul and Attorney General Letitia James against Kalshi, seeking $36 billion in damages. This lawsuit heightens tensions stemming from ongoing conflicts between the states and the federal government regarding authority over prediction markets. Felenstein commented on the situation, emphasizing that Sportradar aims to serve its clients within the existing legal framework as long as they are permitted to operate in their jurisdictions.
