Introduction to Gambling and Sports Betting ETFs
Exchange-traded funds (ETFs) offer an exciting avenue for investors interested in the growing gambling and sports betting sector. As the industry continues to evolve, several ETFs focus specifically on companies involved in this dynamic market.
The gambling industry in the U.S. has transformed significantly after legalizing sports betting in various states. This decision, alongside the rapid advancement of mobile technology, has made betting more accessible and convenient than ever through user-friendly apps.
Currently, the online sports betting industry is valued at $14 billion, with forecasts suggesting it could reach $24 billion within five years. This figure excludes the broader gambling landscape, including casinos and other betting platforms, indicating the sector's robust growth potential.
Despite its expansion, the industry is still in its early stages, which reflects in the limited number of dedicated ETFs focusing on sports betting, iGaming, and gambling.
Pacer BlueStar Digital Entertainment ETF
The Pacer BlueStar Digital Entertainment ETF (NASDAQ: ODDS) is an innovative addition to the ETF space, rising to become a top performer this year with a 29% increase year-to-date and a 34% rise over the past year.
This ETF tracks the BlueStar Global Online Gambling, Video Gaming, and eSports Index, incorporating companies that derive at least 50% of their revenue from online gambling, video game development, or eSports. To maintain its portfolio, the ETF employs a rules-based strategy, ensuring stocks meet specific market cap and trading volume criteria. Currently, it holds around 48 stocks, with Flutter Entertainment being the largest holding, followed by DraftKings and Tencent Holdings.
Launched in April 2022, it is still establishing its track record but boasts an annualized return of approximately 10.2% since inception.
Roundhill Sports Betting & iGaming ETF
Another contender in the gambling ETF arena is the Roundhill Sports Betting & iGaming ETF (NYSE: BETZ). Launched in June 2020, it has shown impressive performance, with gains of roughly 17% YTD and 22% over the last year, making it the largest ETF in this category with about $80 million in assets under management.
This passively managed ETF tracks the Morningstar Sports Betting & iGaming Select Index, designed to provide pure exposure to sports and online betting companies that meet certain criteria. The sports betting firms must focus on analyzing sports events and wagering outcomes, whereas iGaming firms must be engaged in online betting for chance-based games like poker and slots.
Its portfolio consists of 32 stocks, with Flutter Entertainment, DraftKings, and Sportradar Group AG taking the top positions. While the fund has experienced a -14% annualized return over three years, it has seen a 5.1% annual return since inception.
VanEck Gaming ETF
The VanEck Gaming ETF (NASDAQ: BJK) stands as the most established option, having launched in 2008 as the first global gaming ETF. It has returned about 4% so far this year with an 11% increase over the past 12 months.
This ETF tracks the MVIS Global Gaming Index, which features companies engaged in various aspects of the gaming world, including casinos, sports betting, lottery services, and gaming technology. With about $34 million in assets under management, the VanEck ETF maintains a portfolio of approximately 35 stocks. Flutter Entertainment remains a significant position, with Aristocrat Leisure, an Australian manufacturer of gambling machines, and VICI Properties, a REIT focusing on casinos, completing the top three holdings.
Over the past five years, the ETF has recorded an annualized return of 3.1%, while its ten-year annualized return stands at 1.9%.
Choosing the Right ETF for Your Investment Needs
When considering investments in the gambling industry, each of these ETFs presents unique advantages. The Pacer ETF emphasizes sports betting while maintaining exposure to eSports and video gaming. In contrast, the Roundhill ETF delivers the most straightforward approach to pure sports betting exposure.
The VanEck ETF casts a broader net, incorporating casinos and gaming technology, but its returns have been somewhat modest. Therefore, the choice depends on your specific investment objectives.
It's advisable to approach industry-specific ETFs as a small component of a more extensive investment portfolio, allowing for diversification while tapping into the potential benefits of the rapidly growing gambling sector.
Frequently Asked Questions
What are gambling and sports betting ETFs?
Gambling and sports betting ETFs are exchange-traded funds that primarily invest in companies involved in the gambling industry, including online sports betting, casinos, and gaming technology.
How has the gambling industry grown in recent years?
The gambling industry has expanded significantly, especially after the legalization of sports betting in multiple states, with projections of continued growth driven by mobile technology.
Which is the best-performing gambling ETF?
The Pacer BlueStar Digital Entertainment ETF has emerged as a top performer, showing a 29% increase year-to-date.
What types of companies do these ETFs invest in?
These ETFs invest in companies that generate significant revenue from online gambling, video gaming, eSports, and related sectors.
How should I allocate my investments in these ETFs?
It's recommended to include these ETFs as a small part of a diversified portfolio, focusing on your overall investment strategy and risk tolerance.
