Are gambling ETFs worth the bet?
Can clients hit the jackpot investing in gambling-themed ETFs?
The global online gambling industry recently reached more than $70 billion in revenue, according to the American Gaming Association, with online casinos and sports betting driving growth after a 2018 Supreme Court decision opened up the industry to some 38 states and the District of Columbia. The boom has even fueled Superbowl ads and new smartphone apps that let people parlay directly from their pockets. Still, experts say ETFs tracking the burgeoning industry remain small compared with more traditional options and that their success depends largely on broader economic factors and market swings.
“There was a belief for a long time that gaming was, in and of itself, recession-proof, and that people are always going to smoke, drink and gamble,” said Phil Blancato, Osaic’s chief market strategist. “The pandemic changed that narrative.”
Card Up Your Sleeve
The classic “Atlantic City model” of driving down the Jersey Turnpike to gamble has now been replaced by widespread online accessibility, Blancato said. In turn, that has opened up the market to older Americans who don’t want to travel, and younger, more chronically online ones. Year-to-date figures back up the industry’s booming status:
- Roundhill Investments’ Sports Betting & iGaming ETF (BETZ) is up 25.33%.
- Invesco’s Next Gen Media and Gaming ETF (GGME) is up 19.88%.
That boon has also led to an influx of new products, like Roundhill’s ETF, which launched in 2020 during the height of the pandemic.
For Blancato, gambling ETFs are best utilized in small doses — no more than a 3% or 4% allocation — and in bullish markets environments.
Bankroll the Dice. One thing that could be a game-changer is integration with traditional banks. As gambling becomes more integrated into retail investors’ everyday lives, Blancato predicts these ETFs will have stakes in banks in the near future. “There’s going to be crosscurrents between your banking account and your gaming account,” he said. “If there’s a crossover into the mainstream by making [gambling] part of your greater financial picture, I think it could change the narrative.”