Gamblers Gamble

by | 12.09.2022 | Lime Newsletters

Football, Fútbol, Soccer? Who cares, gamblers gamble!

Gambling as an industry – particularly sports betting and iGaming – is growing fast. What was once relegated to March Madness office pools and friendly Super Bowl bets, is now a multi-billion-dollar industry, ranging from online poker to fantasy sports to in-game betting.

There is a specific catalyst for this explosive expansion: the Supreme Court’s repeal of PASPA (Professional and Amateur Sports Protection Act) in 2018, which previously banned most forms of sports betting in the US with very limited exemptions. As a result, the market has been flooded with new electronic betting platforms and the non-stop advertising that comes with it.

The sports gambling book has certain periodic high points: the Super Bowl gambling books are large ($7.6b in Super Bowl LVI), as are the NCAA basketball tournament ($3.1b), and the ongoing World Cup ($1.8b in the US alone). These books typically increase if teams with big followings make progress (ex., Brazil in the World cup or the Dallas Cowboys in the NFL).

With newer, creative ways to wager, this expansive trend is unlikely to stop any time soon. Some of the classic casino names, like MGM and Caesar’s, are aggressively expanding into sports betting, and Churchill Downs (host of the Kentucky Derby) is emerging into the space through joint ventures with DraftKings and FanDuel to expand the $12b/yr. horse racing market via iGaming.

All of which is to say: it doesn’t matter whether you call it football, fútbol, or soccer – follow the oddsmakers because their books keep getting bigger.


Navigating the Gambling Investable Universe – Pick Your Lane 

Broadly speaking, the gambling market spans four “lanes”:

  • Traditional casinos and hotels
  • Electronic platforms, including the high-growth sports betting segment
  • Software and equipment providers
  • Real estate property owners

Investors looking to build exposure to the sector should know what it is that they are looking for: is it the defensiveness of casinos and real estate operators, or the fast growth of sports betting and iGaming? It’s also important to understand the geographic footprint of these names. China, which is still going through Covid-related challenges, represents a substantial portion of the main US casino operators in the US (MGM, WYNN, and LVS).

The following are some large-caps operating in these different “lanes.” Please note that this is a simple market-cap based sample, not a merit-based choice or recommendation in any shape or form.

Conventional Casinos LVS ($34.1b mkt cap), CZR ($10.4b), WYNN ($9.0b). Las Vegas Sands sold its US operations and is now an Asia Pacific operator. Wynn and Caesar’s have a large portfolio of properties in the US (Wynn also in Asia Pacific) and have expanded into electronic betting via acquisitions and organic development.

Sports Betting CHDN ($8.2b), DKNG ($6.5b). Albeit with different starting points – a 150yr classic horse racing track for Churchill Downs and a 10yr web-based gambling platform for DraftKings – both companies primarily offer users the ability to remotely wager in sports events.

Services IGT ($4.9b), LNW ($6.0b). International Gaming Technology PLC, and Light & Wonder Inc., provide software tools and support to Lottery and iGaming operators.

Real Estate VICI ($33.0b) and GLPI ($13.7b). Vici Properties and Gaming and Leisure Properties are two large-cap REITs (Real Estate Investment Trusts) that own and lease casino properties throughout the US. They pay a 4.7% and 5.4% dividend yield, respectively.


What could go wrong with this type of strategy?

Investors need to choose their lane and recognize each company’s specific circumstances before making an investment decision. For example, investors ought to understand that although Las Vegas Sands is a Las Vegas-Nevada based company, its operations are substantially concentrated in Singapore and Macau. Also, investors seeking defensive positions could be better served by the low volatility and higher dividend yields of real estate operators VICI and GLPI than the aggressive growth and back-loaded rewards of DKNG and CHDN.


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