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Sports Betting and iGaming Industry | Overview

Learn more about our Sports Betting ETF

 

The Global Gaming Industry may be of interest to some investors due to its above average revenue growth, margins and ROI. Past performance is not a guide for future returns.

We believe that the gaming segment is Sports Betting and iGaming is positioned well for future growth. In particular, the US is expected to grow 23x from $2b in 2020 to $53b in 2033, according to analysts at Goldman Sachs. Morgan Stanley also agrees: 

“We see legalized US sports betting and iGaming as a once in a generation shift in what was a mature gaming industry” said Thomas Allen, Morgan Stanley.

The key catalyst for growth in the US has been regulatory change. PASPA was overturned in May 2018, allowing individual US states the right to legalize sports betting through legalization or constitutional amendments. Until then, sports betting was only legal in Nevada. Now, sports betting has rapidly become legal in 24 states and on its way to 39 states by 2023, according to various analysts. iGaming is also rapidly expanding from the current six states to an expected 11 states in 2023.

Other potential growth drivers may include: wider social acceptance of sports betting as an entertainment activity; sports betting support from leagues, teams and media companies; spending conversion from illegal to legal markets; technological improvements that allows of an enhanced online experience; and greater time spent on mobile devices.

The industry has generated positive financial returns (as illustrated through several charts and data references throughout this paper), with expected EBITDA margins of between 30-35%. Larger players that are able to leverage marketing spend (the key non-tax operating expense) across a wider range of products and physical properties are expected to generate above average margins. Relatively moderate capex also drives above average Free Cash Flow and ROI metrics.

The companies selected in our Index include B2C online-focused brands that have exposure to a wide range of online gaming products; omnichannel companies that have bricks and mortar casinos with an increasing emphasis to online; and service provides to B2C companies that include technology platform, sports data providers, media and affiliate marketing companies.

The index our Sports Betting ETF tracks is diversified across company type, size and regional exposure. It includes larger and more established companies alongside a number of small to medium size companies that specialise in one aspect of the value chain that can grow inline, or at a faster pace than the industry.

 

To learn more about our Sports Betting ETF, please visit our fund page here.

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