Online gambling puts ETFs promising sports to record high rates

ETF players are doubling down on the field of online gambling and sports betting in 2021.

Bet interest has skyrocketed throughout the coronavirus pandemic, and a week after Super Bowl LV, affiliated ETFs are enjoying a higher run.

Currently, there are two major funds out there that offer prime gambling experience and sports betting – the Roundhill Sports Betting & iGaming (BETZ) and the VanEck Vectors Gaming ETF (BJK). Both were launched last year and have run swiftly to record high standards.

BETZ, in particular, has skyrocketed 96% since its launch in early June.

VanEck’s ETF offers a more traditional mix of casino stocks and gambling names – including Wynn Resorts and Las Vegas Sands – that have been hit hard by travel and leisure problems. BETZ is a pure global play on digital game stocks such as online betting PointsBet, betting company Canada Score Media, and even a handful of SPACs with a focus on sports betting technology and data providers.

BETZ Funds has grown to raise more than $ 350 million in total managed funds in just seven months and has seen $ 146 million so far this year.

Will Hershey, co-founder and CEO of Roundhill Investments, said the industry has been in an ever-growing fashion since sports betting was legalized at the U.S. federal level in 2018 with the repeal of the Defense Act Professional and Amateur Sports 1992 (PASPA).

This should come as no surprise as Super Bowl Sunday sparked an extra dose of strong betting activity. It’s the single biggest bet day of the year for both Las Vegas sports books and online betting shops – and for the world of ETFs, it doesn’t matter.

The numbers have started to go up on a state-by-state basis, and current figures show that $ 444 million in regulated regulators has been put on the big game with seven states left for reporting.

That already breaks a total of $ 300 million last year and marks a record handle, or sum bet, on any one event. Analysts from PlayUSA expect the final tally to exceed $ 500 million in Super Bowl legal bet this year – and that doesn’t include billions more pouring in through markets black and unregulated sports books.

U.S. sports betting revenue is expected to reach $ 2.5 billion in 2021 and is expected to grow to $ 8 billion by 2025.

What is driving the rapid expansion? Hershey cites the ubiquitous shift from brick-and-mortar services to mobile and online as well as a broad expansion in law across the country.

More and more states are coming online for legal sports betting, such as Tennessee and Virginia, which took out the first online sports betting in January.

“We anticipate that as the U.S. market matures and more states come online, that’s going to shift, and it’s going to mean revenue for sports book operators,” Hershey said. on CNBC’s “ETF Edge” last week. “But perhaps more importantly, it’s going to mean tax dollars for state legislators.”

Sports betting has now been legalized in some form in 21 U.S. states, including New Jersey, Nevada and Pennsylvania, along with Washington, DC But some of the largest states – California, Florida and Texas – still not following a suit.

However, Hershey maintains that we are at the beginning of the law and it is expected that 10-12 more states will come online this year.

In Hershey ‘s mind, it makes perfect sense for states to authorize sports betting to close the budget gap that comes with the pandemic and bring in additional tax revenue.

“I really think what’s going on here, similar to what we’re seeing in the cannabis industry, is there substantial budget deficits at the state level, even at the national level,” Hershey said. “We’re really just getting started. When we look at the opportunity here for the US markets [alone], we are talking above of $ 20- $ 30 billion in terms of total address market for sports betting. “

With the rapid rise of players like DraftKings and FanDuel, sports betting interest has shifted dramatically from everyday fantasy sports to live betting – but Hershey believes most of the real money will still be in casinos on online, with sports books specifically guiding consumer engagement. .

Running a game of blackjack would still offer higher margins and a much more guaranteed income than, say, this year’s Super Bowl, where Tom Brady and the Tampa Bay Buccaneers defense stopped sports fans with awarding a blow loss to the Kansas City Chiefs, 31-9.

“Who would see that coming?” Said Hershey. “You have to rule for that as a sports book. Live betting technology is evolving to the point where we’re not even talking about the next 10 minutes, we’re talking the The next pitch is a loop or a quick ball. I think that’s going to unlock the real opportunities of monetization when the technology gets to that point. “

Some skeptics may dismiss the idea of ​​engaging in online gambling activity or buying more pots to balance state budgets, but said Dave Nadig, research director at ETF Trends , that he sees the story of the tax as inevitable.

“Certainly, legal on cannabis, a big part of that is this campaign for tax revenue, at both state and local level,” he said in the same “ETF Edge” interview. “I think we’ll see the same thing, realistically, in anything we previously regulated as a ‘sin activity,’ like gambling.”

Bottom line: When it comes to hot, lively topics related to gamification trends, ETF investors are all in.

Disclosure: CNBC parent Comcast and NBC Sports are investors in FanDuel.

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