During its Q2 earnings call on Monday, Sportradar discussed its strategic move into the rapidly growing US prediction markets, elaborating on recent partnerships with Kalshi and Polymarket. However, the company cautioned that regulatory uncertainties in the US, along with delays in finalizing contracts, may postpone significant financial gains until 2027 or later.
CEO Carsten Koerl highlighted the considerable commercial opportunities these exclusive partnerships present, potentially broadening Sportradar's target addressable market (TAM) and diversifying its client base in sports betting. "With our premium content, global scale and unmatched product portfolio and capabilities, predictions market is a natural adjacency," he stated, adding that this expansion would open up new states for sports betting, draw in new players, and enhance engagement with the sports sector.
While Koerl and CFO Craig Felenstein did not divulge specifics about the deals made with Kalshi and Polymarket, Koerl noted that Sportradar’s previous experience in online sports betting could inform its approach in the prediction market, facilitating collaboration with significant players like exchanges, market makers, and brokers.
In June, Sportradar entered into a multi-year global partnership with Kalshi to deliver real-time data for trade settlement, fan engagement, customer acquisition, and integrity services across major sports leagues such as MLB and UFC. This agreement includes mixed, fixed, and variable components, allowing Sportradar to benefit from potential growth in volume.
At the time of the announcement, Koerl had characterized prediction markets as a compelling growth engine, asserting that Sportradar was well-positioned to lead in this new arena. For the three-month period ending May 31, revenue from its marketing and media services increased by 16%, fueled by strong spending within the prediction market industry. According to a note from Citizens analyst Jordan Bender, this positive trend is expected to continue through the latter half of the year with new entrants in the prediction market as the NHL and NBA seasons commence.
On the same day, Sportradar announced a multi-year collaboration with Polymarket to provide Tennis Data Innovations (TDI) data, which will give registered users live access to around 20,000 matches each season.
Felenstein provided insights into how the terms of these deals distinguish them from traditional sportsbook agreements. He explained that the arrangement involves both fixed and variable fee structures, allowing Sportradar to capture potential upsides as the market expands. "We want to ensure that the economics are beneficial for us and our partners in the prediction market, but also for our existing sportsbook partners," he noted, emphasizing their aim to secure diverse deals across different markets.
Koerl expressed optimism regarding their framework, underscoring the importance of latency and in-depth data as key elements for generating new revenue opportunities. He discussed the expansive potential within prediction markets, highlighting Sportradar's ultra-low-latency feeds and advanced data capabilities, such as accurate ball-tracking data for tennis, delivered in mere milliseconds.
Looking ahead, Koerl indicated that Sportradar anticipates finalizing additional agreements in the prediction markets ecosystem soon and expects revenue from these markets to reach "tens of millions" by 2026. Despite the delays in signing new contracts impacting quarterly earnings, he expects a strong uptick in the second half of the year.
Sportradar reported revenues of €64 million ($73.9 million) from its SportsContent, Technology & Services division for the quarter, reflecting a 9% year-on-year increase attributed to rising affiliate marketing spending in the prediction market and ongoing sportsbook customer acquisition efforts. Felenstein projected full-year revenue growth for 2026 to fall between 19% and 21%, translating to approximately €1.518 billion to €1.533 billion based on current foreign exchange rates.
However, Koerl acknowledged that protracted negotiations and delayed approvals from leagues have hindered revenue realization, noting a need to wait not only on Sportradar's part but also for approvals from league partners. "The delay with the prediction markets is not only in our hands," he said, admitting that these factors have led to lowered expectations for the year, even as they anticipate a robust performance in the latter half.
In light of recent pressures on Sportradar's stock due to uncertainty surrounding prediction markets and short-seller allegations—which the company has denied—Bender provided context on market reactions. Following a 20% drop in April linked to allegations suggesting a significant portion of Sportradar's business services illegal markets, Koerl assured that Sportradar has a rigorous compliance framework in place to mitigate risks.
As prediction markets evolve, Kalshi has taken steps to introduce political-event contracts and is now venturing into sports-event contracts. Despite regulatory challenges, including a lawsuit from New York Governor Kathy Hochul and Attorney General Letitia James targeting Kalshi for $36 billion, the prediction market landscape remains contentious, with ongoing litigation from multiple states and a complex relationship with federal regulatory bodies. Koerl reiterated that Sportradar will focus on servicing clients wherever legally permissible, reinforcing their commitment to navigating these turbulent waters in pursuit of growth in the prediction markets sector.
