The online sports betting industry is projected to be worth $37 billion in the U.S. and $112 billion globally by 2025. That kind of value inspires a great deal of competition and that makes it a hassle for investors to choose the right companies to buy stock in. Roundhill Sports Betting & iGaming ETF [BETZ] invests in online betting companies big and small, along with infrastructure firms servicing the industry. This makes it a no-brainer if you want to take a position in the growing sector. However, there are also caveats so we examine if BETZ is a good investment?
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The bull case for BETZ
BETZ holds positions in companies that are profitable and fast-growers that have not yet realized a profit. This gives investors some low-level risk that’s covered by the safe bets. With 41 holdings covering companies around the globe, the ETF’s top three holdings are Penn National Gaming, Flutter Entertainment, and Kambi Group; all big players in the field.
Nineteen states have legalized online sports betting and eight more are pending this year. Experts predict that legalization will come on with a domino effect as neighboring states realize the potential tax revenue to be earned. Experts also predict that online betting will be accessible to 96% of the U.S. population and 75% of all sports betting revenue will come from online wagers by 2025.
Virtual reality is expected to play a significant role in the industry as well, enhancing gamblers’ online experience. All of this spells big returns for online gambling companies and makes BETZ an attractive long-term play.
The bear case for BETZ
There’s one thing that the online gambling community does not offer that your local bookie does: credit. If you wanted to place a $300 bet on the Yankees beating the Blue Jays, your bookie could float you the amount until you’re able to settle.
Furthermore, Native American tribes are strongly against online gambling as it would take away revenue from their casinos. Their strong ties with state politicians will be a major hurdle for legalization.
Additionally, the BETZ ETF is fairly young (roughly 18 months), so it doesn’t have much of a tracking history. Year-over-year (YoY), its price is down over 30%. And finally, the fund presents some risks from its exposure to international companies.
So, is BETZ a good investment?
As a long-term play, absolutely. I feel that the ease and convenience of placing and tracking your gambling online trumps any sort of credit you can get from a live bookie and is safer in the long run. Online gambling is poised to explode in the next few years and the BETZ ETF has a nice chunk of the market.
1. When did BETZ debut on the stock market?
June 3, 2020.
2. What is BETZ’s expense ratio?
3. How much revenue has online gambling generated in 2020?