5 ways to invest in sports betting stocks and funds

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

Sports betting is rapidly growing in popularity. Well over half of U.S. states have legalized it, and 4 more were actively working on legislation to legalize it as of January 2024, according to the American Gaming Association. Industry revenues were up 46.6 percent in the first 11 months of 2023, reaching $9.2 billion, according to the AGA. Americans wagered more than $106 billion on sports through the end of November in 2023.  .

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 2024 game, according to the AGA.

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

1. Sportsbook apps

The most obvious place to check out are the companies directly involved in sports betting, such as those running the apps enabling bettors to plunk down their money. If you’re looking to get exposure to this growing market, this is probably your best bet. Here are some top players:

• DraftKings (DKNG): This is one of the largest companies in the sports-betting space, boasting a market cap 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 has continued to see growth in states where sports betting has been legal for several years.
• Flutter Entertainment (FLUT): You might not know this company’s name but you’ve probably heard of FanDuel, its 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 in the public market, and it focuses on online gaming and sports betting.

You may find other players in sports betting, 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 leverage its ESPN brand. However, sports betting is a small part of the larger diversified company. Privately owned media company Yahoo also offers bettors a Yahoo-branded sportsbook powered by BetMGM, leveraging its position in fantasy sports. Still, you wouldn’t likely get the same “bang for your buck” from these types of companies compared to the available “pure play” opportunities in betting.

2. Gaming companies

Another way to play the rise of sports betting is to invest in larger gaming companies, known more informally as casinos. Many casinos run sportsbooks and online sportsbooks, but you’d also be investing in the gambling and hotel operations, so you wouldn’t get highly focused exposure to sports betting. Some of the top players here include:

• Caesars Entertainment (CZR): This company operates its namesake property on the Las Vegas Strip as well as dozens more properties. In 2021, it bought the U.K.-based bookmaker William Hill but quickly sold its foreign operations to focus on U.S. sports.
• Penn National Gaming (PENN): While known for its non-Vegas properties in smaller markets across the U.S., Penn has moved hard into the online sports betting market. It acquired a 36 percent interest 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 Sands (LVS): This company runs some of the most popular casino companies in the world, including the Marina Bay Sands and the Venetian Macao, among many others. It’s been slow to embrace online and sports gambling, but is starting to move into the area.

3. Gaming ETFs

If you’re looking for broad exposure to gaming, including sports gambling, online gaming and traditional physical locations, you could 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 if more people travel and go to casinos. Here are two funds that focus on the area:

• Roundhill Sports Betting and iGaming ETF (BETZ): This newer fund focuses narrowly on sports betting and online gaming, so it’s a good pick if you want a purer play on the sector. The expense ratio is a hefty 0.75 percent, however.
• VanEck Vectors Gaming ETF (BJK): This fund provides a broader sample of betting companies, including some of the 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 wager on the growth of the sector as a whole.

4. Racetracks

If you’re into horse racing, you have a good publicly traded option, and it’s an icon in the industry:

• Churchill Downs (CHDN): The name associated with the Kentucky Derby has much more going for it than just this annual race. It operates TwinSpires, an online platform for sports betting, including on the horses. Plus, it offers more traditional casino games at a number of locations and more, so it’s not just a one-trick pony.

5. Tech providers

Besides investing in the gaming companies directly, you could also invest in the companies that provide the technology behind the gaming. It’s like investing in the “picks and shovels” companies in the gold rush. Here are some popular names:

• GAN (GAN): This company provides a range of gaming software to the industry, including to leaders such as FanDuel. It supports sports betting as well as online gambling and virtual simulated gaming.
• Kambi Group (KMBIF): This company is another “name behind the name,” offering sports-betting tech to online and traditional casinos.

Risks

If investors are looking to invest in individual stocks or even in the gaming industry as a whole, it’s important to pay attention to the risks. Here a couple that are especially relevant to investing in sports betting right now:

• Taxes and regulation: Gambling is a heavily regulated area of the economy. While states are increasingly open to online gaming and sports betting, they often put onerous restrictions on these kinds of businesses, including high taxes. Many states view the legalization of gambling as a way to increase tax revenues, and they often levy high taxes on a sector where much of the public takes a dim view of its social value.
• Valuation: As with any investment, you want to be careful with the price you’re paying for the potential gains. Many investors have flooded the sports-betting market given the strong expectations for growth in the coming decade. They may have bid up prices so much already that the future gains are much less attractive or even non-existent.

As with any investment, you’ll want to look carefully at a range of other factors before plunging into the market.

Bottom line

Sports betting is growing in popularity, and it could be an attractive place to invest, especially as new forms such as app-based betting expand. Investors have other avenues to play the space, though, and even those who want to make a broad-based play on betting have ETFs.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.