ETF Trends CEO Tom Lydon discussed the Roundhill Sports Betting & iGaming ETF (BETZ) on this week’s “ETF of the Week” podcast with Chuck Jaffe on the MoneyLife Show.
BETZ is designed to offer retail and institutional investors exposure to sports betting and iGaming industries by providing investment results that closely correspond, before fees and expenses, to the performance of the Roundhill Sports Betting & iGaming Index (“BETZ Index”).
The fund is the first ETF globally designed to track the online sports betting and online casino sector. It provides a first-mover advantage and is already resonating with traders. Launched on June 4, BETZ has $70 million in assets under management, with an average daily trading volume of 1.7 million shares.
This is a play on disruptive technologies being applied to an old industry. The old guard casino business is being disrupted by technology, but many related investments don’t adequately capitalize on that trend.
The ETF includes (i) companies that operate in-person and/or online sportsbooks (ii) companies that operate online/internet gambling platforms and (iii) companies that provide infrastructure or technology to such companies in (i) or (ii).
It also shifts away from traditional brick-and-mortar operations to online or internet-based business models; brick-and-mortar casinos, and venues that in some instances, can cost $2 million or $3 million a day just to open the doors. BETZ holds only three companies that operate physical casinos.
Good Timing With Stay-At-Home Orders?
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.
iGaming and sports wagering are in the early innings of growth, and as such, there will be some bumps in the road. Estimates run as high as $20 billion apiece for the respective market sizes of online casinos and sports betting over the next several years, assuming more than 30 states come online.
There is regulatory risk. Some states are moving too slowly to approve or not approve online casinos, sports gambling, or both. Recent history proves that it can be a long time from approval to the first sports bet being placed in many states.
With BETZ, there’s exposure to the core and pure-play companies with sports betting exposure. Pure play firms are those whose primary business model and/or growth prospects are directly linked to the Sports Betting and/or iGaming Industry.
For these companies, continued growth in the Sports Betting and/or iGaming Industry is expected to be critical to their economic success going forward. Core holdings would be those with substantial operations and/or growth prospects linked to the Sports Betting and/or iGaming Industry.