5 Ways to Invest in Sports Betting Stocks and Funds

One of the best ways to make money from sports betting is to bet on the house – by investing in it!

Sports betting is rapidly growing in popularity. According to the American Gaming Association, well over half of US states have legalized it, and four more are actively working on legislation to legalize it starting in January 2024. According to AGA, industry sales rose 46.6 percent to $9.2 billion in the first eleven months of 2023. As of the end of November 2023, Americans bet more than $106 billion on sports.

The Super Bowl, scheduled for February 11, is expected to set gambling records. More than 67 million Americans are expected to bet $23.1 billion on the game in 2024, according to the AGA.

Here are five ways you can invest in the hot sports betting market.

1. Sports betting apps

The most obvious place to look are the companies directly involved in sports betting, such as those that run apps that help bettors save their money. If you want to gain a foothold in this growing market, this is probably your best choice. Here are some top players:

  • DraftKings (DKNG): This is one of the largest companies in the sports betting space with a market capitalization of more than $20 billion (as of February 2024). The company says it has a market share of nearly 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, its fantasy sports website and sportsbook. According to the company, FanDuel holds about 43 percent of the U.S. online sports betting market. Flutter also has other well-known online gaming names including PokerStars and Betfair.

  • Rush Street Interactive (RSI): Rush Street is a newer, smaller name in the public market and focuses on online gambling and sports betting.

You may also find other sports betting providers, although they may have other larger companies.

For example, The Walt Disney Company (DIS) launched its own sports betting app to leverage its ESPN brand. However, sports betting is only a small part of the larger, diversified company. Privately held media company Yahoo also offers bettors a Yahoo-branded sportsbook operated by BetMGM, leveraging its position in fantasy sports. Still, you probably wouldn’t get the same value for money from these types of companies as you would from the “pure” betting options available.

2. Gaming companies

Another way to profit from the rise of sports betting is to invest in larger gambling operations, more colloquially known as casinos. Many casinos offer sports betting and online sports betting, but they would also invest in gaming and hotel operations, so you wouldn’t focus as much on sports betting. The top players here include:

  • Caesars Entertainment (CZR): This company operates its namesake property on the Las Vegas Strip as well as dozens of other properties. In 2021, the company bought UK-based bookmaker William Hill but quickly sold its overseas operations to focus on US sports.

  • Penn National Gaming (PENN): Although Penn is known for its operations outside of Vegas in smaller markets across the U.S., the company has made significant inroads into the online sports betting market. The company acquired a 36% stake in Barstool Sports in 2020 before acquiring the entire company in February 2023. However, in August 2023, it sold the company back to Barstool founder David Portnoy and announced a new sports betting partnership with ESPN.

  • MGM Resorts International (MGM): This company operates its eponymous casino on the Las Vegas Strip, as well as the Mirage and many others. The company also operates online gambling and sports betting through its BetMGM website.

  • Las Vegas Sands (LVS): This company operates some of the most popular casino properties in the world, including the Marina Bay Sands and the Venetian Macao, among others. The adoption of online and sports gambling has been slow but is starting to gain traction in this space.

3. Gaming ETFs

If you are looking for broad exposure to the gaming space, including sports gambling, online gambling and traditional physical locations, you could choose a gaming ETF. With an ETF, you could get broad exposure to the industry without having to pick a winner, and you could benefit as more people travel and go to the casino. Here are two funds that focus on this area:

  • Roundhill Sports Betting and iGaming ETF (BETZ): This newer fund has a narrow focus on sports betting and online gambling, making it a good choice if you want a purer entry into this sector. However, the expense ratio is a whopping 0.75 percent.

  • VanEck Vectors Gaming ETF (BJK): This fund offers a wider selection of betting companies, including some of the most popular sports betting companies as well as more traditional casino operators. The fund’s expense ratio is 0.72 percent.

An ETF could be a good option for someone who simply wants to bet on the growth of the sector as a whole.

4. Racetracks

If you are interested in horse racing, you have a good listed option and it is an icon in the industry:

  • Churchill Downs (CHDN): The name associated with the Kentucky Derby has much more to offer than just this annual race. She runs TwinSpires, an online platform for sports betting, including on horses. Additionally, it offers more traditional casino games at 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 gaming. It’s like investing in the “pick and shovel” companies in the gold rush. Here are some popular names:

  • GAN (GAN): This company provides a range of gaming software to the industry, including market leaders such as FanDuel. It supports sports betting as well as online gambling and virtual simulation games.

  • Kambi Group (KMBIF): This company is another “name behind the name” that offers sports betting technology for online and brick-and-mortar casinos.

Risks

When investors want to invest in individual stocks or even the entire gaming industry, it is important to pay attention to the risks. Here are a few that are particularly relevant to investing in sports betting at the moment:

  • Taxes and Regulation: Gambling is a highly regulated industry. As states become more open to online gambling and sports betting, they often impose significant restrictions on these types of businesses, including high taxes. Many states view legalizing gambling as a way to increase tax revenue, often imposing high taxes on a sector where much of the public disdains the social value of gambling.

  • Evaluation: As with any investment, you should be careful about the price you pay for the potential profits. With strong growth expectations in the coming decade, many investors have flooded the sports betting market. They may have already pushed prices up so much that future profits are much less attractive or even non-existent.

As with any investment, you should carefully consider a number of other factors before entering the market.

Bottom line

Sports betting is growing in popularity and could be an attractive place to invest, especially as new forms such as app-based betting increase. However, investors also have other ways to operate in this space, and even those who want to make broad-based bets have ETFs.

Editorial Disclaimer: All investors are advised to conduct their own independent research on investment strategies before making any investment decision. In addition, investors should note that the past performance of an investment product does not guarantee future price increases.

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