Betting on a Sure Thing
Record growth for the legalized sports betting sector … more states heading toward legalization … how to invest … the tailwind of technology (again)
$1 million lost …
Courtesy of two unfortunate bets on an NFL football game.
It happened a couple weeks ago when an overconfident New York Giants fan made two separate $500,000 bets on the Giants vs. 49ers game.
The unlucky bettor’s first wager was that the Giants would cover the spread. This meant they needed to lose by three points or less (or just win the game).
They 49ers crushed them 36 – 9.
The second bet was that Giants quarterback, Daniel Jones, would throw for more than 244.5 yards.
He didn’t even break 200.
And faster than Eli Manning could throw an interception, $1 million was gone.
But this story does have a big winner.
***While this Giants fan was an unfortunate loser, the legal sports betting industry has become an overwhelming winner
To make sure we’re all on the same page, it was back in 1992 when the Professional and Amateur Sports Protection Act became law. This banned sports betting in the U.S., except in Nevada.
All of this changed on May 14, 2018, when the U.S. Supreme Court overturned the law by a 6-to-3 vote.
To be clear, the Supreme Court decision didn’t legalize sports gambling — rather, its decision made it “not illegal.”
This means it’s up to each state to decide if, how, and when sports betting operates within its borders.
But states have been deciding — they’ve been saying “yes” to legalization, and the growth numbers are soaring.
This past August, New Jersey’s legalized sports betting complex brought in a record $667.9 million — that was the biggest month of all time.
Keep in mind, that wasn’t just New Jersey’s all-time high, it was the record for the entire United States, including Las Vegas. The previous all-time high of $614.1 million was set by Nevada back in November 2019.
And it’s not just New Jersey …
It’s been just five months since sports betting was legalized in Colorado.
Back in May, Coloradans bet just $25 million on sports. By August, that number had soared to $128 million.
Source: Fox News Denver
Or we could look at Iowa …
From the Gazette:
A “perfect storm” of overlapping professional and college sports in September helped drive sports wagering to a record month in Iowa …
Bets on college and professional football, as well as pro baseball, basketball, ice hockey, NASCAR, soccer and horse racing pushed last month’s handle to nearly $72.4 million — a monthly record for a gambling activity authorized Aug. 15, 2019, in Iowa.
Or Pennsylvania …
It hit its own all-time high in August with $365 million in sports wagers.
We could go on showing you explosive growth numbers, but I’m hoping you see the trend here.
Legalized sports betting industry is becoming big business. And the momentum isn’t slowing down.
***More states are poised to legalize sports gambling soon
For more on this, let’s turn to our thematic expert, Matt McCall, editor of Investment Opportunities.
Matt has been bullish on legalized gambling investments from the very beginning. In fact, one of his favorite gambling-related stocks is up more than 200% from its March lows.
Here’s Matt with more on the growth picture:
Things have really changed in the last two years:
- 18 states and Washington, D.C. now allow sports wagers
- 4 more states have legalized it but not yet begun the actual betting
- 6 states have sports betting on the ballot
So, depending on the voting in those states, more than half the country may soon allow sports betting.
Matt goes on to explain how, when Nevada was the only state where you could bet legally, nearly $5 billion was wagered there each year.
But that amount represented just 3% of the estimated $150 billion bet illegally through bookies around the country.
Back to Matt:
As more states legalize sports gambling, money previously bet under the table is making its way into legal channels.
The growth numbers from various states earlier in this Digest illustrate that point.
***The poster child of investing in legalized sports betting
DraftKings (DKNG) is arguably the best-known sports betting platform.
It went public via a SPAC back in April. And what’s happened since?
Since completing its reverse merger, it climbed more than 260% before pulling back this fall.
You need to be careful with DraftKings, however. The young company is still working toward profitability. It reported a net loss of nearly 50% of its revenue in 2019, almost all of which resulted from operational losses.
Given this, an investment in DraftKings today at its current market price is, please excuse the pun, a bit of a risky bet.
Earlier in the year, Matt commented on other ways investors could approach the sector:
There are a number of players that can take a big piece of the growing sports gambling pie. The most obvious are the casinos that can easily add a sportsbook and attract gamblers who are already on their properties …
There are the bookmakers that have been around for years, many of these overseas. Several are making big moves into the United States as they struggle on their home turf, including one I recommend in Investment Opportunities.
Then, technology is needed to power the gambling experience on land and on mobile. In the coming years, the majority of wagers will be placed via apps, so there are opportunities in companies at the forefront of this technology.
***Matt spoke to this “tech” angle in his MoneyWire update from last week
He noted that widening legalization is a huge catalyst for the gambling sector in its own right. But the sector will enjoy an additional tailwind as technology enables more people to wager on more bets.
Back to Matt:
In the coming years, the majority of wagers will be placed via apps and mobile devices as the 5G revolution provides speed and reliability …
… fast and immediate connectivity also expands the number of bets that are possible. These are in-game bets, sometimes called proposition — or “prop” — bets. They are the real game changer, so to speak.
Matt explains that in-game gambling — also referred to as in-play betting — will enhance the experience of attending sporting events.
It will also lead to a ridiculous boom for gambling platforms …
This is because in-play betting enables fans to bet in real time, wagering on certain mini-outcomes within the game itself. For example, what will the next batter do in a baseball game? Homerun? Strikeout?
Will your alma mater’s football team run or pass on the next play?
Will Lebron James make or miss his next free throw?
Back to Matt:
The possibilities are practically limitless, thanks to the 5G technology breakthrough that allows for nearly instant connectivity from a mobile device.
Matt’s Investment Opportunities newsletter has a handful of sub-portfolios, two of which specifically focus on legalized sports betting and 5G connectivity, respectively.
To learn more as a subscriber, click here.
In any case, huge momentum is building in both of these sectors. Investors who align themselves accordingly stand to generate a great deal of wealth this decade.
Here’s Matt with the final word:
Sports betting is just another in a long list of industries benefitting from the 5G network rolling out right now.
It is shaping up to be one of the most transformative and lucrative technological advances many investors are likely to see in their lifetimes.
Have a good evening,
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.