The U.S. sports betting industry is still in its formative stages, but with epic growth coming, perhaps as soon as next year, investors may want to examine related assets. For those that don’t want to stock pick in this arena, the VanEck Vectors Gaming ETF (NasdaqGM: BJK) is an exchange traded fund to consider.
BJK tries to reflect the performance of the MVIS Global Gaming Index. For index eligibility, companies must generate at least 50% of their revenues from gaming. Gaming includes casinos and casino hotels, sports betting (including internet gambling and racetracks), and lottery services as well as gaming services, gaming technology, and gaming equipment.
One of the primary catalysts for BJK is increased legalization of sports betting here in the U.S. Currently, 23 states, including Washington, D.C., are legal sports wagering states with 18 being operational. The driver for BJK here in the States is internet casinos or iGaming. Both of these markets are expected to swell to $20 billion in the coming years as more states look for new ways of generating revenue.
Sports Betting: A Pandemic Play
Sports betting in the U.S. is getting a big boost from the coronavirus pandemic, but market observers believe growth will last well beyond the defeat of the virus.
“Despite the pandemic shutting down live sporting events for most of the second quarter in 2020, according to the American Gaming Association (AGA), revenue from legal sports betting through July remains up 19% year-over-year, partially due to legal sportsbooks going live in 12 states over the past year,” according to VanEck. “Q1 2020 outperformed Q1 2019 by a whopping 49%, and it would not be unreasonable to once again reach this level of growth with the return of major sports leagues and events.”
During the multi-month shutdown forced by the virus, states’ collection of gas, sales, and gaming taxes were in trouble. Now coffers are running light, prompting some analysts to say more states will approve internet casinos and/or sports betting as avenues for generating revenue.
BJK also merits consideration as a post-election idea because it’s likely Louisiana, Maryland and South Dakota voters sign off on permitting sports betting.
“This may bode well for investors, gaming technology companies and traditional casinos,” notes VanEck. “In our view, sports betting is here to stay, and we believe it may reward companies with the ability to pivot and tap into online gambling.”
For more alternative investing ideas, visit our Alternatives Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
