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You Can Bet On Stocks And Sports With This New iGaming ETF

June 4, 2020 2:55 pm
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You Can Bet On Stocks And Sports With This New iGaming ETF

High-flying DraftKings (NASDAQ:DKNG) finally has a home in an exchange-traded fund and investors finally have a way of accessing the fast-growing sports betting market in an umbrella fashion with today's debut of the Roundhill Sports Betting & iGaming ETF (NYSE:BETZ).

What To Know

The Roundhill Sports Betting & iGaming ETF debuts on the day that marks the first birthday of Roundhill's first ETF: the Roundhill BITKRAFT Esports & Digital Entertainment ETF (NYSE:NERD).

Like its older stablemate, BETZ is appropriately tickered and addresses a high-growth market highly attractive to younger players and investors.

BETZ tracks the Roundhill Sports Betting & iGaming Index and in the “fun fact” column, that benchmark allocates just over 7% of its weight to DraftKings. The online sportsbook company went public on April 24 and BETZ is its first ETF home of note.

Why It's Important

BETZ debuts as analysts are dramatically increasing their forecasts for the iGaming and sports wagering markets. Just a few months ago, even the rosiest of assumptions stated sports betting in the U.S. would be a $7 billion to $10 billion business four or five years assuming more than 35 states were in the fray.

More recently, those forecasts are approaching $20 billion each for iGaming and sports betting on the basis that more cash-starved states will turn to online casinos and sports gambling as avenues for bolstering coffers following the coronavirus pandemic. On a somewhat related note, the launch of BETZ coincides with DraftKings announcing it gained online access to the Michigan sports wagering market.

“Growth in the US market is expected to increase as the regulatory environment evolves state by state. Ellers & Kreijuk estimates that US online sports betting will reach $14 billion at maturity,” according to Roundhill. “However, the US currently lags behind the UK and Australia in terms of per capita gambling spend. If we estimate the market based on per capita rates in those countries, the market would reach $22 billion or $23 billion, respectively.”

The 30 BETZ holdings are primarily classified as sportsbook operators and technology companies with iGaming, land-based casino operators and lead generation names representing just over a third of the fund's roster.

The traditional casino names in BETZ — Penn National Gaming (NASDAQ:PENN), Eldorado Resorts (NASDAQ:ERI), Boyd Gaming (NYSE:BYD) and MGM Resorts International (NYSE:MGM) — all have significant sports betting exposure and some (namely Penn) have growing iGaming footprints.

What's Next

As more states permit sports betting, BETZ could attract investors. The rookie ETF may benefit from some good timing, too. Some states, including Colorado, Illinois and Michigan, recently legalized sports wagering, but efforts to get that revenue source off the ground were stymied by COVID-19.

Now, with the domestic sports betting calendar inching toward normalcy, sports betting equities could get a lift, boosting BETZ in the process.

Plus, BETZ has some other arrows in its quiver, including being the first ETF home to GAN Ltd. (NASDAQ:GAN), which went public a month ago and is soaring. Additionally, the ETF's 4.16% weight to resurgent Penn National is the largest among all ETFs.

BETZ charges 0.75% per year, or $75 on a $10,000 investment.

Disclosure: The author owns shares of DKNG, GAN and PENN.

Photo credit: Baishampayan Ghose, Flickr

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