One of the best ways to make money with sports betting is to bet on the house – by investing in it!
Sports betting is becoming increasingly popular. According to the American Gaming Association, more than half of US states have legalized it, and four other states were actively working on legislation to legalize it starting in January 2024. According to the AGA, industry revenues rose 46.6 percent to $9.2 billion in the first eleven months of 2023. Americans have wagered more than $106 billion on sports by the end of November 2023.
The Super Bowl, scheduled for February 11, is expected to set gambling records. More than 67 million Americans are expected to wager $23.1 billion on the 2024 competition, according to the AGA.
Here are five ways you can get in the game and invest in the popular sports betting market.
1. Sportsbook apps
The most obvious place to visit are the companies directly involved in sports betting, such as those that run the apps that allow gamblers to deposit their money. If you want to gain exposure to this growing market, this is probably your best bet. Here are some top players:
- DraftKings (DKNG): This is one of the largest sports betting companies, with a market capitalization of more than $20 billion as of February 2024. The company says it has a market share of almost 40 percent as of September 2023 and continues to see growth. in states where sports betting has been legal for several years.
- Flutter Entertainment (FLUT): You may not know the name of this company, but you’ve probably heard of FanDuel, the fantasy sports site and sportsbook. FanDuel has about 43 percent of the U.S. online sports betting market, according to the company. Flutter also has other high-profile online gaming names, including PokerStars and Betfair.
- Rush Street Interactive (RSI): Rush Street is a newer, smaller name on the public market and focuses on online gaming and sports betting.
You may find other players in sports betting, even though they may have other larger businesses.
For example, the Walt Disney Company (DIS) has launched its own sports betting app in an effort to strengthen its ESPN brand. However, sports betting is a small part of the larger, diversified business. Privately held media company Yahoo also offers bettors a Yahoo-branded sportsbook powered by BetMGM, leveraging its position in fantasy sports. However, you probably won’t get the same “bang for your buck” with these types of companies when compared to the “pure play” betting options available.
2. Gaming companies
Another way to capitalize on the rise of sports betting is to invest in larger gaming companies, more informally known as casinos. Many casinos operate sportsbooks and online sportsbooks, but you would also invest in the gambling and hotel operations, so you don’t get a very focused focus on sports betting. Some of the top players here are:
- Caesars Entertainment (CZR): This company operates its namesake property on the Las Vegas Strip, as well as dozens of other properties. In 2023, it bought British bookmaker William Hill, but quickly sold its overseas operations to focus on American sports.
- Penn National Gaming (PENN): While Penn is known for its non-Vegas properties in smaller markets in the US, it has been making inroads into the online sports betting market. It acquired a 36 percent stake in Barstool Sports in 2020 before acquiring the entire company in February 2023. However, it sold the company back to Barstool founder David Portnoy in August 2023 and announced a new sports betting partnership with ESPN.
- MGM Resorts International (MGM): This company operates its namesake casino on the Las Vegas Strip, as well as the Mirage and many others. It also operates online gambling and sports betting through its BetMGM site.
- Las Vegas Sand (LVS): This company operates some of the most popular casino companies in the world, including Marina Bay Sands and Venetian Macao, among others. It has been slow to embrace online gambling and sports gambling, but it is starting to move into this area.
3. Gaming ETFs
If you’re looking for broad exposure to gaming, including sports gambling, online gaming, and traditional brick-and-mortar locations, you can opt for a gaming ETF. With an ETF you could get broad exposure to the sector without having to pick a winner, and you could benefit from more people traveling and going to casinos. Here are two funds that focus on this area:
- Roundhill Sports Betting and iGaming ETF (BETZ): This newer fund focuses exclusively on sports betting and online gaming, so it’s a good choice if you want a purer play on the sector. However, the expense ratio is a hefty 0.75 percent.
- VanEck Vectors Gaming ETF (BJK): This fund offers a broader sample of gambling companies, including some of the popular sportsbooks and more traditional casino operators. The fund’s expense ratio is 0.72 percent.
An ETF can be a good option for someone who simply wants to bet on the growth of the sector as a whole.
4. Race tracks
If you’re into horse racing, you have a good publicly traded option, and it’s an industry icon:
- Churchill Downs (CHDN): The name associated with the Kentucky Derby has much more to offer than just this annual race. It operates TwinSpires, an online sports betting platform, including on horses. Plus, it offers more traditional casino games in a number of locations and more, so it’s not just a one-trick pony.
5. Technology providers
In addition to investing directly in the gaming companies, you can also invest in the companies that provide the technology behind the gaming. It’s like investing in the picks and shovels companies during the gold rush. Here are some popular names:
- GAN (GAN): This company provides a range of gaming software to the industry, including leaders like FanDuel. It supports sports betting, online gambling and virtual simulated gaming.
- Kambi Group (KMBIF): This company is another ‘name behind the name’, providing sports betting technology to online and traditional casinos.
Risks
If investors want to invest in individual stocks or even the gaming industry as a whole, it is important to pay attention to the risks. Here are a few that are especially relevant to investing in sports betting right now:
- Taxes and regulations: Gambling is a highly regulated part of the economy. Although states are becoming increasingly open to online gaming and sports betting, they often impose heavy restrictions on these types of businesses, including high taxes. Many states view the legalization of gambling as a way to increase tax revenue, often imposing high taxes on an industry where much of the public has a dim view of its social value.
- Valuation: As with any investment, you want to be careful about the price you pay for the potential gains. Many investors have flooded the sports betting market given strong growth expectations over the next decade. They may have already pushed prices so high that future profits are much less attractive or even non-existent.
As with any investment, you should look carefully at a number of other factors before entering the market.
In short
Sports betting is becoming increasingly popular and could be an attractive place to invest, especially as new formats such as app-based betting proliferate. However, investors have other options for playing this market, and even those who want to gamble on a broad basis have ETFs.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making any investment decision. In addition, investors are advised that the past performance of investment products does not guarantee future price increases.
