Following the 2018 Supreme Court ruling on the Professional and Amateur Sports Protection Act (PAPSA), sports wagering is taking off mightily in the U.S.
Once thought of as a taboo endeavor with links to organized crime, at least in ex-Nevada terms, sports betting is now live and legal in 21 states and Washington, D.C. with another 10 states having signed off on the activity, according to the American Gaming Association (AGA). In that latter group, Arizona, Louisiana and Maryland, among others, could join the live and legal party by the start of the upcoming 2021 football season.
What's happening today is not only sports wagering emerging from the shadows, it along with internet casinos are being increasingly validated as revenue generators for states. That's an important consideration when acknowledging some many states were financially crimped by the coronavirus pandemic.
Additionally, the investment community is increasingly validating this thesis. Take the case of the Roundhill Sports Betting & iGaming ETF (BETZ). In a true thematic exchange traded fund success story, BETZ debuted just over a year ago as the first and still only ETF dedicated to the emerging iGaming and sports betting investment frontiers. Today, the fund has $370 million in assets under management.
BETZ Bet Makes Sense for Growth Investors
While BETZ is the first ETF of its kind, it taps into a trend that other successful thematic ETFs used to generate success: Its investment concept and objective is easy for investors of all skill levels to comprehend. That starts with its benchmark – the Roundhill Sports Betting & iGaming Index.
“The index consists of a tiered weight portfolio of globally-listed companies who are actively involved in the sports betting & iGaming industry. This classification includes (i) companies that operate in-person and/or online sports books (ii) companies that operate online/internet gambling platforms and (iii) companies that provide infrastructure or technology to such companies in (i) or (ii),” according to Roundhill.
In even more simple terms, BETZ is ideally positioned to capitalize on the growth of both sports wagering and iGaming. Investors should note that while companies like DraftKings (DKNG) and FanDuel engage in both endeavors, sports wagering and online casinos are two distinct fields.
Internet casinos are currently permitted in just a handful of states, but that also means there's a longer runway for growth than is found with sports wagering. Of note to investors are two important points. First, states are keen to permit iGaming because it generates more tax revenue than sports betting. Second, online casinos are higher margin businesses for operators than equivalent sportsbook operations.
Growth Is Coming
Not that sports wagering should be ignored as a growth industry. It should not be and various forecasts confirm as much.
“According to our research, during the next five years, as the handle for online sports betting scales 10-fold from roughly $18 billion to $180 billion, the three major sports betting categories combined could generate 31% revenue growth at a compound annual rate, increasing the online sports betting category from $9.5 billion last year to $37 billion in 2025,” according to ARK Investment Management.
Another potential feather in the BETZ cap is corporate action. Whether its spinoffs, asset sales or outright mergers and acquisitions, the ETF is levered to those trends, which analysts expect will be common in the online gaming space for some time.
A handful of BETZ components are already rumored to be takeover targets while several others are slated to sell businesses.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.